Explain agreement for the production

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Reference no: EM1397359

Zapota Inc has a 1-year agreement for the production of 200,000 gear housings for a new off-road vehicle. Owner Alexander Zapota hopes the agreement will be extended and the volume increased next year. Zapota has industrialized costs for three alternatives. They are common purpose equipment (GPE), flexible manufacturing system (FMS, and expensive however efficient, dedicated machine (DM). The cost data follow-
General- Flexible Purpose Manufacturing Dedicated Equipment System Machine (GPE) (FMS) (DM)
Annual contracted units 200,000 200,000 200,000
Annual fixed cost $100,000 $200,000 $500,000
Per unit variable cost $ 15.00 $ 14.00 $ 13.00
Which process is best for this contract?

Reference no: EM1397359

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