Contemporary Engineering Economics (6th Edition)
6th Edition
ISBN: 9780134105598
Author: Chan S. Park
Publisher: PEARSON
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Chapter 8, Problem 9P
(a):
To determine
Identify the components.
(b):
To determine
Calculate the contribution margin.
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A recent engineering was given the job of determining the best production rate for a new type of casting in a
foundry. After experimenting with many combinations of hourly production rates and total production cost
per hour, he summarized his findings in (table 1). The engineering then talked to the firm's marketing
specialist, who provided estimates of selling price per casting as a function of production output (see table 2).
There are 8,760 hours in a year. What production rate would you recommend to maximize total profits per
year?
Table 1
Total cost per hr
Casting production per hr
$1,000
100
$2,600
200
$3,200
300
$3,900
400
$4,700
500
Table 2
Selling price / casting Casting production per hr
$20.00
100
$17.00
200
$16.00
300
$15.00
400
$14.50
500
The answer is Blank 1 per hour
A recent engineering was given the job of determining the best production rate for a new type of casting in a foundry. After experimenting with many combinations of hourly production rates and total production cost per hour, he summarized his findings in (table 1). The engineering then talked to the firm’s marketing specialist, who provided estimates of selling price per casting as a function of production output (see table 2). There are 8,760 hours in a year. What production rate would you recommend to maximize total profits per year?
Table 1
Total cost per hr Casting production per hr
$1,000 100
$2,600 200
$3,200 300
$3,900 400
$4,700 500
Table 2
Selling price / casting Casting production per hr
$20.00 100
$17.00 200
$16.00…
An important application of regression analysis in accounting is in the estimation of cost. By collecting data on volume and cost and using the least squares
method to develop an estimated regression equation relating volume and cost, an accountant can estimate the cost associated with a particular manufacturing
volume. Consider the following sample of production volumes and total cost data for a manufacturing operation.
Production Volume (units)
Total Cost ($)
400
4,000
450
5,000
550
5,400
600
5,900
700
6,400
750
7,000
a. Use these data to develop an estimated regression equation that could be used to predict the total cost for a given production volume. Do not round
intermediate calculations.
Compute b1 and bo (to 1 decimal). bị
bo
Complete the estimated regression equation (to 1 decimal). Do not round intermediate calculations
b. What is the variable cost per unit produced (to 2 decimal)? Do not round intermediate calculations
2$
c. Compute the coefficient of determination (to 3…
Chapter 8 Solutions
Contemporary Engineering Economics (6th Edition)
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