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 ( R 2 ) 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

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Jun 25, 2024

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

1938

189

714

2450

Dec-98

134

1023

1340

189

714

1799

Jan-99

335

2576.8

3259

1200

189

714

4621.2

Feb-99

231

1848

2257

189

714

3045

Mar-99

369

2844

440

3310

189

714

4906

Apr-99

330

2540

3246

189

714

4320

May-99

391

3128

3925.2

189

714

5496.8

Jun-99

569

4552

5482

189

714

7966

Jul-99

453

3448.8

4105.2

189

714

6245

Aug-99

694

5152

6835.2

166

714

9712.8

Sep-99

733

5744

440

7345.2

166

714

10018.8

Oct-99

750

6400

8515.2

166

714

10894.8

Nov-99

919

7452

9645.2

166

714

13282.8

Dec-99

812

6631

8219

166

714

11568

Jan-00

715

5480

6910

1440

166

840

10010

Feb-00

876

6892

8360

166

840

12264

Mar-00

1114

10920

490

16350

166

840

16430

Apr-00

1576.8

20592

18472

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?