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ilè Edit View History Bookmarks People Window Help , ) 100% gg- Wed Sep 5 11:47 AM Do Homework- Jinchun Shi Secure https://www.mathxl.com/Student PlayerHomework.aspx7homeworkid 4946602398 question de118 used tae8c d 51310058 en eri Operations Management-4231- MSOM 3101-007, TR 11:00 am-1 jinchun Shi 9/5/18 11:47 AM Homework: Ch 7S - Capacity Mgmt Score: 0.25 of 1 pt Save 17 of 20 (20 complete) Score: 93%, 18.6 of 20 pts Problem 7.2 Borges Machine Shop, Inc, has a 1-year contract for the production system (FMS), and expensive, but efficient, dedicated machine (DM). The cost data foilow E Question Help 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 altematives. They are general-purpose equipment (GPE), flexible manufacturing General-Purpose Flexible Manufacturing Dedi System (FMS) 200,000 $200,000 $14.00 Equipment (GPE) Machine (DM) Annual contracted units 200,000 Annual fixed cost Per unit variable cost 200,000 $500,000 $13.00 $150,000 $18.00 The option GPE is best when the contracted volume is below 12500 units (enter your response as a whole number). The option FMS is best when the contracted volume is betweenadunits (enter your responses as whole numbers Enter your answer in the edit fields and then click Check Answer. Check Answer Clear All remaining

Explanation / Answer

Let the required volume for FMS to be the best option = N

Also ,

Total cost = Fixed cost + Variable cost / unit x Number of units ( i.e. N )

For FMS to be the best ,

Or, 200,000 + 14.N < = 150,000 + 18.N

Or, 4.N > = 50,000

Or, N > = 12,500

Or, 200,000 + 14.N < = 500,000 + 13.N

Or, N < = 300,000

Taking into account of both, we can say :

12,500 < = N < = 300,000

THE OPTION FMS IS THE BEST WHEN CONTRACTED VOLUME IS BETWEEN 12,500 AND 300,000

THE OPTION FMS IS THE BEST WHEN CONTRACTED VOLUME IS BETWEEN 12,500 AND 300,000

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