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FirstLieutenantTrain
FirstLieutenantTrain
11.05.2021 • 
Business

Gamarro Corporation manufactures a drink​ bottle, model CL24. During 2017​, Gamarro produced 160,000 bottles at a total cost of $720,000. Degraff Corporation has offered to supply as many bottles as Gamarro wants at a cost of $4.40 per bottle. Gamarro anticipates needing 175,000 bottles each year for the next few years. a. What is the average cost of manufacturing a drink bottle in 2017​? How does it compare to Degraff​'s offer?
b. Can Gamarro use the answer in requirement 1a to determine the cost of manufacturing 175,000 drink​ bottles? Explain.
c. Gamarro​'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​ variable:

y​ =$437,000 +$2.00X

d. During the years used to estimate the regression​ equation, the production of drink bottles varied from 148,000 185,000. Using this​ equation, estimate how much it would cost Gamarro to manufacture175,000 drink bottles. How much more or less costly is it to manufacture the bottles rather than to acquire them from Degraff​?
e. What other information would you need to be confident that the equation in requirement 2 accurately predicts the cost of manufacturing drink​ bottles?

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