Engineering Economy
16th Edition
ISBN: 9780133582819
Author: Sullivan
Publisher: DGTL BNCOM
expand_more
expand_more
format_list_bulleted
Question
Chapter 3, Problem 21P
(a):
To determine
Calculate the cost.
(a):
To determine
Calculate the new cost.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
a) Determine the variable cost per unit and the fixed cost using the high-low method.b) What is the equation of the total mixed cost function?c) Prepare the scatter diagram and insert the trendline or line of best-fit. Use a scaleof 2 cm to represent 1,000 units on the x-axis & 2 cm to represent $50,000 on the yaxis.
1. Exercise 9.1
A study of 86 savings and loan associations in six northwestern states yielded the following cost
function.
2.38
0.006153Q
0.000005359Q²
19.2X1
C
+
+
(2.62)
(2.84)
(3.16)
(3.50)
where C = average operating expense ratio, expressed as a percentage and defined as total
operating expense ($ million) divided by total assets ($ million) times 100 percent.
Q = output; measured by total assets ($ million)
X1 = ratio of the number of branches to total assets ($ million)
Note: The number in parentheses below each coefficient is its respective t-statistic.
Which of the variable(s) is (are) statistically significant in explaining variations in the average
operating expense ratio? (Hint: t0.025,7€ 1.99
.) Check all that apply.
X1
Q2
What type of average cost-output relationship is suggested by these statistical results?
Quadratic
Linear
Cubic
Based on these results, what can we conclude about the existence of economies or diseconomies
of scale in savings and loan associations in…
2. Exercise 9.2
A study of 86 savings and loan associations in six northwestern states yielded the following cost function.
C
3.41
(3.41)
0.007384Q
(2.84)
0.000005359Q2
(3.16)
23.0X1
(3.23)
where C = average operating expense ratio, expressed as a percentage and defined as total operating expense ($ million) divided by total assets ($
million) times 100 percent.
Q = output; measured by total assets ($ million)
X₁ = ratio of the number of branches to total assets ($ million)
Note: The number in parentheses below each coefficient is its respective t-statistic.
Holding constant the effects of bank branching (X1), what is the level of total assets that minimizes the average operating expense ratio?
$1,557.42 million
O $688.93 million
$461.81 million
$1,377.87 million
What is the average operating expense ratio for a savings and loan association with the level of total assets determined in the previous part and 1
branch?
1.18%
0.90%
4.94%
3.44%
What is the ratio with 10 branches instead?…
Chapter 3 Solutions
Engineering Economy
Ch. 3 - Prob. 1PCh. 3 - Prob. 2PCh. 3 - Prob. 3PCh. 3 - Prob. 4PCh. 3 - Prob. 5PCh. 3 - Prob. 6PCh. 3 - Prob. 7PCh. 3 - Prepare a composite (weighted) index for housing...Ch. 3 - Prepare a composite (weighted) index for housing...Ch. 3 - Prob. 10P
Ch. 3 - Prob. 11PCh. 3 - Prob. 12PCh. 3 - Prob. 13PCh. 3 - Prob. 14PCh. 3 - Prob. 15PCh. 3 - A biotech firm is considering abandoning its old...Ch. 3 - Prob. 17PCh. 3 - Prob. 18PCh. 3 - Prob. 19PCh. 3 - Prob. 20PCh. 3 - Prob. 21PCh. 3 - Prob. 22PCh. 3 - Prob. 23PCh. 3 - Prob. 24PCh. 3 - Prob. 25PCh. 3 - Prob. 26PCh. 3 - Prob. 28SECh. 3 - Prob. 31CSCh. 3 - Prob. 32CSCh. 3 - Prob. 36FECh. 3 - Prob. 37FECh. 3 - Prob. 38FECh. 3 - Prob. 39FECh. 3 - Prob. 40FECh. 3 - Prob. 41FE
Knowledge Booster
Similar questions
- 1. Exercise 9.1 A study of 86 savings and loan associations in six northwestern states yielded the following cost function. C 2.38 (3.33) 0.006153Q (3.08) 0.000005359Q² (3.16) 19.2X₁ (2.96) where C = average operating expense ratio, expressed as a percentage and defined as total operating expense ($ million) divided by total assets ($ million) times 100 percent. Q = output; measured by total assets ($ million) X₁ = ratio of the number of branches to total assets ($ million) Note: The number in parentheses below each coefficient is its respective t-statistic. Which of the variable(s) is (are) statistically significant in explaining variations in the average operating expense ratio? (Hint: £0.025,70 = 1.99.) Check all that apply. Q2 What type of average cost-output relationship is suggested by these statistical results? ○ Cubic Linear Quadratic Based on these results, what can we conclude about the existence of economies or diseconomies of scale in savings and loan associations in the…arrow_forwardATC, AAC, AVC, MC (/uni 270.00 24000 21000 180.00 150.00 120.00 10:00 60.00 30.00 0:00 02 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 Units of Output (0) Unit Cost Curves Refer to the graph above. The curves are not labeled. To help get this question right, you must first label the curves. An output level of 18 is identified with the dark vertical line. The shaded rectangular area (height times width) is the O average sunk cost. O total sunk cost O total avoidable fed cost. O total avoidable cost. O None of the abovearrow_forwardYour last submission is used for your score. 1. Need Help? Read It عيمي Burnem Inc. manufactures thumb drives and sells them to a distributor. Burnem's total cost and total revenue (in dollars) for x thumb drives are given by the following equations. Total cost = 5x + 2240 and Total revenue = 10x How many thumb drives must Burnem sell to break even? x = thumb drives Using data from 2010 and projected to 2020, the population of the United Kingdom (y, in millions) can be approximated by the equation 10.0y 4.55x = 581 where x is the number of years after 2000.+ (a) What is the projected population in 2026? y = (b) In what year is the population predicted to be 67.2 million? Disposable income, the amount left after taxes have been paid, is one measure of the health of the economy. Using U.S. Energy Information Administration data for selected years from 2015 and projected to 2040, the U.S. real disposable income per capita (in dollars) can be approximated by the equation I 707.6t + 39,090…arrow_forward
- 2arrow_forwardonly d,e,f pleasearrow_forwardCarlota Music Company estimates that the marginal cost of manufacturing its Professional Series guitars is C ′ (x) = 0.02x + 100 dollars/month when the level of production is x guitars/month. The fixed costs incurred by Carlota are $4000/month. Find the total monthly cost incurred by Carlota in manufacturing x guitars/month.arrow_forward
- The cost, in millions of dollars, of building a three-story high school in NewYork State was estimated to be: 2C x x x x 1.7 0.14 0.0001 20 400where x is the number of thousands of square feet. Suppose that you arecontemplating building a for-profit three-story high school and estimate thatyour total revenue will be $0.2 million dollars per thousand square feet.(a) What is minimum area for a three-story high school in New YorkState, that this model covers? (b) What is the variable cost of building a three-story high school in NewYork State? (c) What is the fixed cost of building a three-story high school in NewYork State? (d) Determine the profit function,P x( ), for building a three-story highschool in New York State? . (e) Determine,P(250) , for building a three-story high school in New YorkState, and interpret the result. (f) How many thousands of square feet should a three-story high schoolbuilding in New York State be in order to break even?arrow_forwardI need help understanding how to solve thisarrow_forwardThe amount of fish caught per week on a trawler is a function of the crew size assigned to operate the boat. Based on past data, the following production schedule was developed: Crew size 2 3 4 5 6 7 8 9 10 11 12Fish caught (100 lbs/week) 3 6 11 19 24 28 31 33 34 34 33 b) How large a crew should be used if the trawler owner is interested in maximizing the total amount of fish caught?c) How large a crew should be used if the trawler owner is interested in maximizing the average amount of fish caught per person?d) Suppose the owner can sell all the fish caught for $75 per 100 pounds and can hire as many crew members as desired by paying them $150 per week. Assuming that the owner of the trawler is interested in maximizing profits, determine the optimal crew size.arrow_forward
- please do c, d, earrow_forwardA company is planning to manufacture snowboards. The fixed costs are $125 per day and the total costs are $5,786 per daily output of 19 boards. What is the average costs per board tend to as production increases?arrow_forward1. For each of the cost functions given below, do the following things: C(T) = = 10 + 2T. C(T) = T0.8 (a) Draw the graph for C(T), with T on the horizontal axis. Explicitly the values for the intercepts. (b) Derive AC and MC respectively, and draw their curves. (c) Determine whether the cost function exhibits IRTS or DRTS or CRTS.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial Economics: Applications, Strategies an...EconomicsISBN:9781305506381Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. HarrisPublisher:Cengage Learning
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Managerial Economics: Applications, Strategies an...
Economics
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning