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AC552 Week 6 Homework Please complete the below problems and submit your answers in the Week 6 Drop Box. See "Syllabus/Due Dates for...

AC552
Week 6 Homework

Please complete the below problems and submit your answers in the Week 6 Drop Box. See "Syllabus/Due Dates for Assignments & Exams" for due date information.

1. Jersey Subs, Inc. wants to find an equation to estimate monthly utility costs. Jersey Subs has been in business for one year and has collected the following cost data for utilities:

a. Which of the preceding costs is variable? Fixed? Mixed? Explain.
b. Using the high-low method, determine the cost function for each cost.
c. Combine the preceding information to get a monthly utility cost function for Jersey.
d. Next month, Jersey Subs expects to use 2,200 kilowatt hours of electricity, make 1,500 minutes of telephone calls, and use 32,000 gallons of water. Estimate total cost of utilities for the month.
AC552 Week 6 Homework Please complete the below problems and submit your answers in the Week 6 Drop Box. See "Syllabus/Due Dates for Assignments & Exams" for due date information. 1. Jersey Subs, Inc. wants to find an equation to estimate monthly utility costs. Jersey Subs has been in business for one year and has collected the following cost data for utilities: Electricity Kilowatt Telephone Minutes Water Water Month Bill Hours Used Bill Used Bill Used January 375 1,250 92.50 $ 1,200 75.00 $ 32,560 February 438 1,458 91.70 $ 1,156 75.00 $ 28,554 March 572 1,906 95.32 $ 1,353 75.00 $ 33,508 April 422 1,406 90.09 $ 1,069 75.00 $ 31,926 May 613 2,042 98.53 $ 1,527 75.00 $ 32,569 June 650 2,167 99.34 $ 1,571 75.00 $ 27,211 July 544 1,813 93.91 $ 1,276 75.00 $ 34,829 August 622 2,073 96.72 $ 1,429 75.00 $ 33,265 September 656 2,188 96.12 $ 1,396 75.00 $ 35,735 October 641 2,135 94.31 $ 1,298 75.00 $ 34,062 November 619 2,063 91.49 $ 1,145 75.00 $ 30,472 December 659 2,198 97.53 $ 1,473 75.00 $ 36,332 a. Which of the preceding costs is variable? Fixed? Mixed? Explain. b. Using the high-low method, determine the cost function for each cost. c. Combine the preceding information to get a monthly utility cost function for Jersey. d. Next month, Jersey Subs expects to use 2,200 kilowatt hours of electricity, make 1,500 minutes of telephone calls, and use 32,000 gallons of water. Estimate total cost of utilities for the month. 2. Bolder Bikes, Inc. manufacturers mountain bike frames in Boulder Colorado. In 2012, they produced 24,000 frames at a total cost of $1,296,000. Frames Unlimited, Inc. has offered to supply as many frames as Boulder Bikes wants at a cost of $49.50. Boulder Bikes anticipates needing 26,000 frames each year over the next few years. Boulder Bikes uses historical cost data to come up with the following regression equation with total manufacturing costs of the frame as the dependent variable and frames produced as the independent variable: y=$545,000 + 21X During the years used to estimate the regression equation, the production of frames varied from 22,000 to 26,000. a. Using this equation, estimate how much it would cost Boulder Bikes to manufacture the 26,000 frames. b. How much more or less costly is it to manufacture the frames rather than to acquire them from Frames Unlimited?
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a. y=$545,000 + 21X We jave X=26000. So y = 545,000 + 21*26000 = $1,091,000 . ....Ans (a) b. We have y = $1,296,000 & X=24,000 By putting value of X, we get y = 545,000+24000*21 = $1,049,000 So we see that the historical data is no longer valid. We now try to find teh Var cost per frame bu tweaking the above eqn & assuming that Fixed costs of $545,000 haven't changed but Var costs (V) have changed. So we get y=545,000+24000*V = 1296,000 Solving for V, we get V = (1296000-545,000)/24000 = $31 per frame So Mfg cost for Frame is $31. ..up from earlier $21 But acuiring cost of frame is $49.50 which is 49.50-31 = 18.50 more than own mfgd frame.
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This question was asked on Jan 14, 2013.

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