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Refer to Problem, If a contract for the second and third years is pending, what are the implications for process selection?

Problem - 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	200,00	200,000	200,000
Annual fixed cost	$100,000	$200,000	$500,000
Per unit variable cost	$15.00	$14.00	$13.00

Which process is best for this contract?

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Operation Management, Management Studies

Category:- Operation Management
Reference No.:- M92174016

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