Cost per Thousand Gallons (Y) Thousands of Plant Gallons Sold (X) 1 $1,015 416.9 2 973 472.5 3 1,046 250.0 4 1,006 372.1 1,058 238.1 6. 1,068 258.6 7 967 597.0 8 997 414.0 9 1,044 263.2 10 1,008 372.0 Total $10,182 3,654.4
Ohio Swiss Milk Products manufactures and distributes ice
cream in Ohio, Kentucky, and West Virginia. The company
wants to expand operations by locating another plant in
northern Ohio. The size of the new plant will be a function of
the expected demand for ice cream within the area served by
the plant. A market survey is currently under way to deter-
mine that demand.
Ohio Swiss wants to estimate the relationship between the
manufacturing cost per gallon and the number of gallons
sold in a year to determine the demand for ice cream and,
thus, the size of the new plant. The following data have been
collected:
a. Develop a regression equation to
lon as a function of the number of gallons produced.
b. What are the correlation coefficient and the coefficient of
determination? Comment on your regression equation in
light of these measures.
c. Suppose that the market survey indicates a demand of
325,000 gallons in the Bucyrus, Ohio area. Estimate the
manufacturing cost per gallon for a plant producing
325,000 gallons per year.
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