### Identify the volume ranges where each process should be used

##### 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?

Problem 2:

Solve Problem 1 graphically

Problem 3:

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.

Problem 4:

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?

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