Borges machine shop inc has a 1-year contract for the, Ask an Expert

Management Studies

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:

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

Using this data determine the economic volume for each process.

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Operation Management, Management Studies

Category:- Operation Management
Reference No.:- M91518382

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