Question

Reling Corporation manufactures a drink bottle, model CL24 During 2000, Reling produced 250,000 bottles at a total cost of $900,000 Young Corporation has offered to supply as many bottles as Reling warts at a cost of $3.50 per borte. Reling anticipates needing 263,000 bottles each year for the next few years Read the gamers The average cost of per bottle than Young's offer Requirement 16. Can Reling use the answer in requirement la to determine the cost of manufacturing 263,000 dink bottes? Explain Rolling take the average manufacturing cost in 2020 to determine the total cost of manufacturing 20.000 drink bottles. The reason is that Requirement 2. Rolling's cost analyst uses annual data from past years to estimate the following regession equation with total manufacturing costs of the drinks bottle as the dependent variable and drink bottles produced as the independent variable y-5438,000 $2.00x. During the years used to estimate the regression equation, the production of die boetes varied from 200,000 to 273.000. Using this equation estimate how much it would cost Reling to manufacture 263.000 drink bottles. How much more or less costly is it to manufacture the bottle her than to acquire them from Young? Estimate how much it would cost Roling to manufacture 263,000 drink boties, the calculate the cost to purchase the bottles 1 Estimated cost to make the bottles Cost to purchase the bottles to purchase the bottles rather the manufacture them in house Requirement. What other information would you need to be confident that the equation in requirement accurately predicts the cost of manufacturing drink bottles Select all that apply)

Answer 1

1 a. Average cost of manufacturing = 900,000 / 250,000 = 3.6 The average cost of manufacturing per bottle is higher than Young's offer.

1 b. Relling cannot take the average manufacturing cost in 2020 to determine the total cost of 263,000 drink bottles. The reason is that some of the $900,000 consists of fixed costs and some part is a variable cost. Without distinguishing, it cannot be determined.

2. 438,000 + 2.00X Estimated cost to make the bottles (438000 + 2(263000) 964,000 Cost to purchase the bottles (3.5*263000) 920,500 It will cost $43,500 less to purchase bottles rather than manufacture them in house.

3.

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