Best suited for the current contracted volume

Assignment Help Operation Management

Reference no: EM132282518

Borges Machine? Shop, Inc., has a? 1-year contract for the production of 225,000 gear housings for a new? off-road vehicle. Owner Luis Borges hopes the contract will be extended and the volume increased next year. Borges has developed costs for three alternatives. They are? general-purpose equipment? (GPE), flexible manufacturing system? (FMS), and? expensive, but? efficient, dedicated machine? (DM). The cost data? follow:

General-Purpose Equipment (GPE) Flexible Manufacturing System (FMS) Dedicated Machine (DM)

Annual contracted units 225,000 225,000 225,000

Annual fixed cost $125,000 $250,000 $525,000

Per unit variable cost $16.00 $14.50 $13.50

Based on the? cost, the process that is best suited for the current contracted volume is:

FMS, GPE, or DM?

Reference no: EM132282518

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