Question
Dubai Digital Enterprises, Inc. produces less than 1% of the world's supply of 32 MB random access memory (RAM) chips for electronic devices.DDE's RAM chips
- Dubai Digital Enterprises, Inc. produces less than 1% of the world's supply of 32 MB random access memory (RAM) chips for electronic devices.DDE's RAM chips perform according to globally accepted performance standards for this type of chip (i.e., its chips are just like every other producers' chips).
DDE provides you with the following cost and output data for the past 18 months. Monthly output of chips is given in the second column, which is titled "Monthly production of finished product."Costs are reported in seven categories (some are fixed costs and some are variable costs).
Cost Items for Harding Silicon Enterprises, Inc.
Month
Monthly production of finished product
Energy expenses
Insurance premiums
Materials
Business licenses
Telephone and internet lines
Rent
Wage expense
Nov-98
175
1446
0
1938
0
189
714
2450
Dec-98
134
1023
0
1340
0
189
714
1799
Jan-99
335
2576.8
0
3259
1200
189
714
4621.2
Feb-99
231
1848
0
2257
0
189
714
3045
Mar-99
369
2844
440
3310
0
189
714
4906
Apr-99
330
2540
0
3246
0
189
714
4320
May-99
391
3128
0
3925.2
0
189
714
5496.8
Jun-99
569
4552
0
5482
0
189
714
7966
Jul-99
453
3448.8
0
4105.2
0
189
714
6245
Aug-99
694
5152
0
6835.2
0
166
714
9712.8
Sep-99
733
5744
440
7345.2
0
166
714
10018.8
Oct-99
750
6400
0
8515.2
0
166
714
10894.8
Nov-99
919
7452
0
9645.2
0
166
714
13282.8
Dec-99
812
6631
0
8219
0
166
714
11568
Jan-00
715
5480
0
6910
1440
166
840
10010
Feb-00
876
6892
0
8360
0
166
840
12264
Mar-00
1114
10920
490
16350
0
166
840
16430
Apr-00
1576.8
20592
0
18472
0
166
840
26036
The future estimated monthly total fixed cost (TFC) = 3,000
DDE has hired you to do undertake the following tasks:
- Plot a scatter diagram of TVC on the vertical axis and Q on the horizontal axis.Does the scatter diagram suggest a functional form for TVC?Explain briefly.
- Plot a scatter diagram of AVC on the vertical axis and Q on the horizontal axis.Does the scatter diagram suggest a functional form for AVC?Explain briefly.
- Estimate a quadratic AVC function and write the estimated AVC, TVC, and SMC functions:
Note: make your approximation for the parameters as follows:
Intercept "a": 2 decimals.
b: 4 decimals
c: 6 decimals.
- Evaluate the results of your regression equation.Specifically discuss: the significance of the model as a whole, goodness of fit (R2). Also discuss the statistical significance of the individual parameters and the algebraic signs of these parameters.
- How many chips should DDE produced (monthly) if world chip prices are $32 per chip? Forecast the DDE's profit at this output level.
- How many chips should be produced (monthly) if world chip prices are $55 per chip?Forecast the profit at this output level.
- At what price should DDE shut down and produce no chips in the short run?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Business Law Today The Essentials
Authors: Roger LeRoy Miller
12th Edition
035703791X, 9780357037911
