Cool Mountain Ice Cream Company produces ten varieties of ice cream in large vats, several

thousand gallons at a time. The ice cream is distributed to several categories of customers. Some

ice cream is packaged in large containers and sold to college and university food services. Some

is packaged in half-gallon or small containers and sold through wholesale distributors to grocery

stores. Finally, some is packaged in a variety of individual servings and sold directly to the public

from trucks owned and operated by Cool Mountain. Management has always assumed that costs

fluctuated with the volume of ice cream, and cost-estimating equations have been based on the following cost function:

Estimated costs = Fixed costs + Variable costs per gallon X Production in gallons

Lately, however, this equation has not been a very accurate predictor of total costs. At the same

time, management has noticed that the volumes and varieties of ice cream sold through the three

distinct distribution channels have fluctuated from month to month.

1. Develop the general form of a more accurate cost-estimating equation for Cool Mountain.

Clearly label and explain all elements of the equation, and provide specific examples of costs

for each element