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 Flexible Manufacturing Dedicated
Equipment (GPE) Systems (FMS) Machine (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
Determine the best process for each of the following volumes:.
1) 75,000
2) 275,000
3) 375,000