raham Comoration manufactures a drink bottie, model CL24. During 2017, Graham pr
ID: 2511646 • Letter: R
Question
raham Comoration manufactures a drink bottie, model CL24. During 2017, Graham produced 180,000 bottles at a total cost of $848,000. Ryan Corporation has offered to supply as many botties as Graham wants a cost of $3 50 per bottle. Graham nicipates needing 194,000 bottles each year for the next few years. per bottle k Requirements The average cost of S Requirement 1b. Can Gralam use the answer in mo,remen Grahamk the average manufacturing cost in 20 1.a. What is the average cost of manufacturing a drink botte in 20177 How does it compare to Ryan's offer? b. Can Graham use the answer in requirement 1a to determine the cost of manufacturing 194,000 drink botties? Explain. Requirement 2. Graham's cost analyst uses annual data from produced as the independent variable: y- $435,000 $2.00x how much it would cost Graham to manufacture 194,000 drin drink bottle as the dependent variable and drink bottlers ed from 168,000 to 204,000. Using this equation, esimate em from Ryan? 2. Graham's cost analyst uses annual data from past years to estimate the following regression equation with total manufacturing costs of the drink bottle as the dependent variable and drink bottles produced as the independent variable: Estimate how much it would cost Graham to manufacture 194 Estimated cost to make the bottles Cost to purchase the bottles y $435,000 $2.00x During the years used to estimate the regression equation, the production of drink bottles varied from 168,000 to 204,000. Using this equation, estimate how much it would cost Graham to manufacture 194,000 drink bottles. How much more or less costly is it to manufacture the botties rather than to acquire them from Ryan? Requirement 3. What other information would you need to be 3. What other information would you need to be confident that the equation in k boties? (Select all that apply) requirement 2 accurately predicts the cost of manufacturing drink bottles? A Can Graham's competitors manufacture drink botters B. Is the relationship between total manufacturing costs C. How good is the goodness of ft? That is, how well dot D. Does the slope of the regression ine indicate that a Print Done Choose from any list or enter any number in the input fields and then continue to the next questionExplanation / Answer
1 a) Average Cost=$648000/180000=$3.6 per bottle
It is $0.10more than the Ryan's offer.
b) Graham cannot take the average cost of 1a) to calculate total costs of 194000 bottles because Total costs includes both variable and fixed costs. Fixed cost remain constant in totality & do not vary with the change in output.
2. As per the equation, total cost to manufacture 194000 bottles is
=$435000+$2.0(194000)=$823000
Cost to purchase the bottles=$3.5*194000=$679000
It is cheaper to purchase the bottles from Ryan by $144000
It will cost $144000 less to purchase the bottles rather than manufacture inhouse
3. B Is the relationship between total manufacturing costs and quantity of drink bottles economically plausible.
Do give your feedback!! Happy Learning :)