ch07pp - or two years what implications does this have for...

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Practice Problems: Chapter 7, Process Strategy Problem 1: Jackson Custom Machine Shop has a contract for 130,000 units of a new product. Sam Jumper, the owner, has calculated the cost for three process alternatives. Fixed costs will be: for general- purpose equipment (GPE), \$150,000; flexible manufacturing (FMS), \$350,000; and dedicated automation (DA), \$950,000. Variable costs will be: GPE, \$10; FMS, \$8; and DA, \$6. Which should he choose? Problem 2: Solve Problem 1 graphically Problem 3: Using either your analytical solution found in Problem 1, or the graphical solution found in Problem 2, identify the volume ranges where each process should be used. Problem 4: If Jackson Custom Machine is able to convince the customer to renew the contract for another one

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Unformatted text preview: or two years, what implications does this have for his decision? ANSWERS: Problem 1: Solve for the crossover between GPE and FMS: 10X + 150000 = 8X + 350000 or 2X = 200000 x = 100,000 units Solve for the crossover between FMS and DA: 8X + 350000 = 6X + 950000 or 2X = 600000 X = 300000 Therefore, at a volume of 130,000 units, FMS is the appropriate strategy. Problem 2 & 3: 1 Below 100,000 units use GPE, between 100,000 and 300,000 use FMS, above 300,000 use DA Problem 4: If Jackson Custom Machine is able to get the customer to extend the contract for another two years, the owner would certainly wish to take advantage of the savings using Dedicated Automation. 2...
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ch07pp - or two years what implications does this have for...

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