Question: Borges Machine Shop, Inc., has a 1-year contract for the production of 225,000 gear housings for …

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Jun 13, 2022

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Question: Borges Machine Shop, Inc., has a 1-year contract for the production of 225,000 gear housings for …

by | Jun 13, 2022 | Questions & Answers


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-Purp ose Flexible Manufacturing System (FMS) 225,000 $250,000 $14.00 Dedicated Machine (DM) 225,000 $525,000 Equipment (GPE Annual contracted units Annual fixed cost Per unit variable cost 225,000 $125,000 $15.00 $13.00 If the contract for the second and third years is pending, for demand below 125,000 units, option ▼| is the best alternative for Luis For demand above 275,000 units, optionis the best alternative for Luis

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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-Purp ose Flexible Manufacturing System (FMS) 225,000 $250,000 $14.00 Dedicated Machine (DM) 225,000 $525,000 Equipment (GPE Annual contracted units Annual fixed cost Per unit variable cost 225,000 $125,000 $15.00 $13.00 If the contract for the second and third years is pending, for demand below 125,000 units, option ▼| is the best alternative for Luis For demand above 275,000 units, optionis the best alternative for Luis

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