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-Purpose Equipment (GPE) Flexible Manufacturing System (FMS) Dedicated Machine (DM) Annual contracted units 225,000 225,000 225,000 Annual fixed cost $125,000 $250,000 $480,000 Per unit variable cost $18.00 $14.00 $13.00 a.The option GPE is best when the contracted volume is below ------ units (enter your response as a whole number). b.The option FMS is best when the contracted volume is between ---- and ----enter your response here units (enter your responses as whole numbers). c. The option DM is best when the contracted volume is over --- units (enter your response as a whole number).

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20th Edition

ISBN:9780357033791

Author:Pride, William M

Publisher:Pride, William M

Chapter19: Pricing Concepts

Section: Chapter Questions

Problem 6DRQ

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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-Purpose Equipment (GPE)   Flexible Manufacturing System (FMS)   Dedicated Machine (DM)
Annual contracted units   225,000 225,000 225,000
Annual fixed cost   $125,000 $250,000 $480,000
Per unit variable cost   $18.00 $14.00 $13.00

a.The option GPE is best when the contracted volume is below ------ units (enter your response as a whole number).

b.The option FMS is best when the contracted volume is between ---- and ----enter your response here units (enter your responses as whole numbers).

c. The option DM is best when the contracted volume is over --- units (enter your response as a whole number).

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