Borges Machine Shop, Inc., has a 1-year contract for the production of 75,000 ge

Question

Borges Machine Shop, Inc., has a 1-year contract for the production of 75,000 gear housings for a new off-road vehicle. Owner Luis Borges hopes the con extended and the volume increased next year. Borges has developed costs for three alternatives. They are general-purpose equipment (GPE), flexible ma system (FMS), and expensive, but efficient, dedicated machine (DM). The cost data follow: Based on the total cost, the process that is best suited for the current contracted volume is FMS. Suppose the contracted volume changes to 275,000 gear housings. Based on the total cost, the process that is best suited for the new volume is FMS. Suppose the contracted volume changes to 375,000 gear housings. Based on the total cost, the process that is best suited for the new volume is .

Explanation / Answer

FMS would be the preferable method. because it bears the lowest cost in manufacturing the products. The cost is counted as =( Number of units * variable cost) + fixed cost

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