7.5 Borges Machine Shop, Inc., has a 1-year contract for the
production of 200,000 gear housings for a new off-road vehicle.
Which process is best for this contract? 7.7 Using the data in Problem 7.5, determine the best process
for each of the following volumes: (1) 75,000, (2) 275,000, and (3)
375,000. 7.11 Tim Urban, owner/manager of Urbans Motor Court in Key
West, is considering outsourcing the daily room cleanup for his
motel to Duffys Maid Service. Tim rents an average of 50 rooms for
each of 365 nights (365 × 50 equals the total rooms rented for the
year). Tims cost to clean a room is $12.50. The Duffys Maid
Service quote is $18.50 per room plus a fixed cost of $25,000 for
sundry items such as uniforms with the motels name. Tims annual
fixed cost for space, equipment, and supplies is $61,000. Which is
the preferred process for Tim, and why? Purchase the answer to view it
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)
Flexable
Manufacturing
System
(FMS)
Dedicated
Machine
(DM)
Annual contracted units
200,000
200,000
200,000
Annual fixed cost
$100,000
$200,000
$500,000
Per unit variable cost
$15.00
$14.00
$13.00
Tim Urban
Duffy's Maid Service
Annual contracted units
18,250
18,250
Annual fixed cost
$61,000
$25,000
Per unit variable cost
$12.50
$18.50
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