Reference no: EM1381020
Q. Problem 1:
Jackson Custom Machine Shop has a contract for 130,000 units of a new product. Sam Jumper, the owner, has calculated the cost for three process alternatives. Fixed costs will be: for general-purpose equipment (GPE), $150,000; flexible manufacturing (FMS), $350,000; also dedicated automation (DA), $950,000. Variable costs will be: GPE, $10; FMS, $8; also DA, $6. Which should he choose?
Solve Problem 1 graphically
Utilizing either your analytical solution found in Problem 1, or the graphical solution found in Problem 2, identify the volume ranges where each process should be used.
If Jackson Custom Machine is able to convince the customer to renew the contract for another one or two year, illustrate what implications does this have for his decision?