Chapter 10 quiz Q3
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Industrial Engineering
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Feb 20, 2024
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Review Quiz: Chapter 10 Quiz Question 3, E10-30 (similar to) Test Scofe: J0.01%, 1744 of 18 points Graham Corporation manufactures a drink bottle, model CL24. During 2020, Graham produced 260,000 bottles at a total cost of $923,000. Ryan Corporation has offered to supply as many bottles as Graham wants at a cost of $3.45 per bottle. | anticipates needing 276,000 bottles each year for the next few years. Read the requirements. €D Click the icon to see the Worked Solution. Requirement 1a. What is the average cost of manufacturing a drink bottle in 20207 How does it compare to Ryan's offer? The average cost of $ 3.55 perbottleis greater than Ryan's offer. Requirement 1b. Can Graham use the answer in requirement 1a to determine the cost of manufacturing 276,000 drink bottles? Explain. Graham cannot take the average manufacturing cost in 2020 to determine the total cost of manufacturing 276,000 drink bottles. The reason is that some of the total costs are fixed costs and some are variable costs . Requirement 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 v: y=$438,000 + $2.00X. During the years used to estimate the regression equation, the production of drink bottles varied from 249,000 to 286,000. Using this equation, estimate how much it would cost Graham to manufacture 276,000 drink bottli more or less costly is it to manufacture the bottles rather than to acquire them from Ryan? Estimate how much it would cost Graham to manufacture 276,000 drink bottles, then calculate the cost to purchase the bottles. Estimated cost to make the bottles $ 990,000 Cost to purchase the bottles $ 952,200 N It will cost $ 37,800 less to purchase the bottles rather than manufacture them in-house. Requirement 3. What other information would you need to be confident that the equation in requirement 2 accurately predicts the cost of manufacturing drink bottles? (Select all that apply.) A. How good is the goodness of fit? That is, how well does the estimated line fit the data? B. Can Graham's competitors manufacture drink bottles at a cost less than Graham?
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