FLEXIBLE

GENERAL-PURPOSE
MANUFACTURING
EQUIPMENT (GPE)
SYSTEM (FMS)
Annual contracted units 200,000 200,000
Annual fixed cost 100,000 200,000
Per unit variable cost $15.00 $14.00

Crossover point between GPE & FMS

100,000 + (15)*V1 = 200,000 + (14)*V1
V1 = 100,000

Crossover point between FMS & DM

200,000 + (14)*V2 = 500,000 + (13)*V2
V2 = 300,000

Ans: Process GPE is most economical, from 0 - 100,000

Process FMS is most economical if the number is between 100,000 - 300,000
Process DM is most economical if the number exceeds 300,000
 DEDICATED MACHINE
(DM)

200,000
500,000
$13.00

100,000
mber is between 100,000 - 300,000
ber exceeds 300,000
 GENERAL-PURPOSE FLEXIBLE MANUFACTURING
EQUIPMENT (GPE) SYSTEM (FMS)

Annual contracted units 200,000 ₫ 200,000 ₫

Annual fixed cost 100,000 ₫ 200,000 ₫
Per unit variable cost 15.00 ₫ 14.00 ₫

Volume = 75,000

GENERAL-PURPOSE FLEXIBLE MANUFACTURING

EQUIPMENT (GPE) SYSTEM (FMS)

Annual contracted units 75,000 75,000

Annual fixed cost $100,000 $200,000
Per unit variable cost $15.00 $14.00
FC + VC $1,225,000 $1,250,000

Ans: The best process will be GPE with a volume of 75,000 and a cost of

Volume = 275,000

GENERAL-PURPOSE FLEXIBLE MANUFACTURING

EQUIPMENT (GPE) SYSTEM (FMS)

Annual contracted units 275,000 275,000

Annual fixed cost $100,000 $200,000
Per unit variable cost $15.00 $14.00
PC + VC $4,225,000 $4,050,000

Ans: The best process will be FMS with a volume of 275,000 and a cost of

Volume = 375,000

GENERAL-PURPOSE FLEXIBLE MANUFACTURING

EQUIPMENT (GPE) SYSTEM (FMS)

Annual contracted units 375,000 375,000

Annual fixed cost $100,000 $200,000
Per unit variable cost $15.00 $14.00
PC + VC $5,725,000 $5,450,000

Ans: The best process will be DM with a volume of 375,000 and a cost of
DEDICATED MACHINE (DM)

200,000 ₫
500,000 ₫
13.00 ₫

DEDICATED MACHINE (DM)

75,000
$500,000
$13.00
$1,475,000

$1,225,000

DEDICATED MACHINE (DM)

275,000
$500,000
$13.00
$4,075,000

$4,050,000

DEDICATED MACHINE (DM)

375,000
$500,000
$13.00
$5,375,000

$5,375,000
 FLEXIBLE
GENERAL-PURPOSE
MANUFACTURING SYSTEM
EQUIPMENT (GPE)
(FMS)
Annual contracted units 200,000 200,000
Annual fixed cost $100,000 $200,000
Per unit variable cost $15.00 $14.00

If a contract for the 2nd & 3rd year is pending, so:

Annual contracted units 200,000
Total no. of year 3
Total unit for 3 years 600,000

Substitute the volume = 600,000 into this table:

FLEXIBLE
GENERAL-PURPOSE MANUFACTURING SYSTEM
EQUIPMENT (GPE)
(FMS)
Annual contracted units 600,000 600,000
Annual fixed cost 100,000 200,000
Per unit variable cost $15.00 $14.00
FC+VC $9,100,000 $8,600,000

Ans: DM will be chosen with $8,300,000 if the contract for the second and third years is still pending.
 DEDICATED MACHINE (DM)

200,000
$500,000
$13.00

DEDICATED MACHINE (DM)

600,000
500,000
$13.00
$8,300,000

ract for the second and third years is still pending.

 ANNUALIZED FIXED COST OF VARIABLE COSTS (PER UNIT) ($)
PROCESS TYPE
PLANT & EQUIP LABOR MATERIAL ENERGY
Mass Customization $1,260,000 30 18 12
Intermittent $1,000,000 24 26 20
Repetitive $1,625,000 28 15 12
Continuous $1,960,000 25 15 10

ANNUALIZED FIXED COST OF VARIABLE COSTS (PER UNIT) ($)

PROCESS TYPE
PLANT & EQUIP LABOR MATERIAL ENERGY
Mass Customization $1,260,000 30 18 12
Intermittent $1,000,000 24 26 20
Repetitive $1,625,000 28 15 12
Continuous $1,960,000 25 15 10

Annual demand 24,000 unit

Cost per unit $120

Ans: Intermittent has the lowest cost ($2.680.000), maximizing the profit from producing the Maxistand.
ER UNIT) ($)
FV + VC
TOTAL
60 $2,700,000
70 $2,680,000
55 $2,945,000
50 $3,160,000

fit from producing the Maxistand.