MGT-4310 Production &Operations; M ework: Assignment Chapter 7 : 0 of 1 pt blem
ID: 361361 • Letter: M
Question
MGT-4310 Production &Operations; M ework: Assignment Chapter 7 : 0 of 1 pt blem 7.6 Borges Machine Shop, Inc., has a 1-year contract for the production of 250,000 gear housings for a new off-road vehicle. Owner Lus Borges hopes the contract will manufacturing system (FMS), and expensive, but efficient, dedic ated machine (DM). The cost data follow They are general purpose equipment (GPE), flexible 250,000 $100,000 $16.00 250,000 $250,000 $14.00 250,000 $500,000 $13 00 Annual contracted unts Per unit variable cost nat The option GPE is best when the contracted volumes belowunits (enter your response as a whole number) This course (MG answer box and then cick Check Answer your answer in theExplanation / Answer
Cross over point between GPE vs FMS = (Fixed cost of FMS - Fixed cost of GPE)/(Variable cost of GPE - Variable cost of FMS)
= (250000 - 100000)/(16-14) = 75,000 units
Cross over point between GPE vs DM = (Fixed cost of DM - Fixed cost of GPE)/(Variable cost of GPE - Variable cost of DM)
= (500000 - 100000)/(16-13) = 133,333 units
Therefore, GPE is best when the contracted volume is below 75,000 units
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