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General-purpose equipment flexible manufacturing system

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Borges Machine? Shop, Inc., has a? 1-year contract for the production of 200,000 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 200,000 200,000 200,000   

Annual fixed cost $100,000 $225,000 $525,000   

Per unit variable cost $18.00 $14.00 $13.00   

1. If the contract for the second and third years is? pending, for demand below 31,250 ?units, -------------- option is the best alternative for luis. (FMS, GPE, DM)

2. For demand above 300,000 ?units, option ------------- is the best alternative for Luis. (FMS, GPE, DM)

Reference no: EM132227354

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