ABC Machine Shop, Inc., has a 1-year contract for the production of 48,000 gear housings for a new off-road vehicle. ABC hopes that the contract will be extended and the production volume increased in the future. ABC is considering three different production technologies: general-purpose equipment (GPE), flexible manufacturing system (FMS), and the expensive, but efficient, option of a dedicated machine (DM). The annual fixed and per unit variable costs for the three alternatives are tabulated below:
GPE FMS DM
Annual fixed cost $260,000 $590,000 $810,000
Per unit variable cost $13 $8 $4
What is the cheapest cost for meeting the current order for 48,000 units? Specify only the amount. e.g. 3500000