Consider each of the following cases.
a. On Laskey’s Turkey Farm, Laskey produced one batch of 5,000 turkeys at a
cost of $20,000. Another batch of 6,000 turkeys cost $22,000. Estimate the cost
function.
b. Bradburn Laboratories handled 50,000 tests in 1997. Total costs are
$500,000; and fixed costs are $200,000. If volume is expected to be 60,000 tests
in 1998, what is Bradburn’s forecast of 1998 costs using the 1997 cost function?
c. For Benman Services, Inc., the cost function is $4,000 per service contract plus
$30,000 per month. What is the average cost of handling a service contract this
month if the activity level is 50 contracts? 30 contracts?