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 contract will be extended and thevolume increased next year. Borges has developed costs for three alternatives. They are general-purpose equipment (GPE), flexible manufacturing system (FMS), and expensive, butefficient, dedicated machine (DM) The cost data followGeneral PurposeEquipment (GPE)Flexible ManufacturingSystem (FMS)75,000$125,000$15.00Annual contracted unitsAnnual fixed costPer unit vanable costBased on the total cost, the process that is best suited for the current contracted volume isSuppose the contracted volume changes to 275,000 gear housings. Based on the total cost, the process that is best suited for the new volume isSuppose the contracted volume changes to 375,000 gear housings. Based on the total cost, the process that is best suited for the new volume isDedicatedMachine (DM)75,000$225,000$14.0075,000$525,000$13.75GPEFMSDM

Calculation of process suitable for current contract volume and new volume are as follows

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 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 Annual contracted units Annual fixed cost Per unit variable cost General Purpose Equipment (GPE) 75,000 $125,000 $15.00 Flexible Manufacturing System (FMS) 75,000 $225,000 $14.00 Dedicated Machine (DM) 75,000 $525,000 $13.75 Based on the total cost, the process that is best suited for the current contracted volume is 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 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 OPE FMS

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 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 Annual contracted units Annual fixed cost Per unit variable cost General Purpose Equipment (GPE) 75,000 $125,000 $15.00 Flexible Manufacturing System (FMS) 75,000 $225,000 $14.00 Dedicated Machine (DM) 75,000 $525,000 $13.75 Based on the total cost, the process that is best suited for the current contracted volume is 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 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 OPE FMS

Essentials of Business Analytics (MindTap Course List)

2nd Edition

ISBN:9781305627734

Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Chapter15: Decision Analysis

Section: Chapter Questions

Problem 5P: Hudson Corporation is considering three options for managing its data warehouse: continuing with its...

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Hudson Corporation is considering three options for managing its data warehouse: continuing with its own staff, hiring an outside vendor to do the managing, or using a combination of its own staff and an outside vendor. The cost of the operation depends on future demand. The annual cost of each option (in thousands of dollars) depends on demand as follows: If the demand probabilities are 0.2, 0.5, and 0.3, which decision alternative will minimize the expected cost of the data warehouse? What is the expected annual cost associated with that recommendation? Construct a risk profile for the optimal decision in part (a). What is the probability of the cost exceeding $700,000?
Borges Machine Shop, Inc., has a 1-year contractfor the production of 200,000 gear housings for a new off-roadvehicle. Owner Luis Borges hopes the contract will be extendedand the volume increased next year. Borges has developed costsfor three alternatives. They are general-purpose equipment(GPE), flexible manufacturing system (FMS), and expensive, butefficient, dedicated machine (DM). The cost data follow: GENERAL-PURPOSE EQUIPMENT(GPE) FLEXIBLEMANUFACTURINGSYSTEM (FMS) DEDICATEDMACHINE(DM) Annual contractedunits 200,000 200,000 200,000Annual fi xed cost $100,000 $200,000 $500,000Per unit variable cost $ 15.00 $ 14.00 $ 13.00Which process is best for this contract?
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Perez Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,300 containers follows. Unit-level materials $ 6,000 6,900 3,600 8,400 26,500 Unit-level labor Unit-level overhead Product-level costs* Allocated facility-level costs *One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Perez for $2.80 each. Required a. Calculate the total relevant cost. Should Perez continue to make the containers? b. Perez could lease the space it currently uses in the manufacturing process. If leasing would produce $12,800 per month, calculate the total avoidable costs. Should Perez continue to make the containers? a. Total relevant cost Should Perez continue to make the containers? b. Total avoidable cost Should Perez continue to make the containers?
You are hired as a consultant for Cool Zone Inc. The company currently has a 1-year contract for the production of 200,000 fuse-plugs for a new state of the art off-road vehicle. With an increasing demand for these vehicles, The owner however, hope that the contract will be extended which will result in increased volume next year. Cool Zone has developed cost for 3 alternatives namely: General-Purpose Equipment (GPE), Flexible manufacturing System (FMS) and expensive but market dominant machine (DM). The cost associated with labour, raw materials and equipment per unit produced is as follows: GPE is $15, while DM and FMS have an associated cost of $13 and $14 respectively. The cost associated with FMS is $200,000, GPE $ 100,000 and DM $500,000 respectively. Regardless of the decision made, the company has to produce a total of 200,000 fuse plugs. (c) If a contract for the second and third year is pending, does this have any implications for the process selection. Please provide ample…