The Goldstein corporation manufactures a bicycle for children,

the CT8 model. Goldstein currently manufactures the bicycle frame. During 2012, Goldstein developed

32,000 racks at a total cost of $1,056,000. The Ryan Corporation has offered to supply the Goldstein Company with as many

racks as desired at a cost of $32.50 per unit. Goldstein anticipates he will need 35,000 frames

annually for the following years.

1. a) What is the average manufacturing cost of a bicycle frame in 2012? How does it compare to

Ryan's offer?

b) Can Goldstein use the answer in part 1a to determine the cost of manufacturing 35,000 racks

of bicycles? Explain your answer.

2. Goldstein's cost analyst uses annual data from previous years to estimate

the following regression equation using the total manufacturing costs of the bicycle frame

as the dependent variable, and the bicycle frames produced as the independent variable:

y = $435,000 + $19X

During the years used to estimate the regression equation, the production of the frames

The bicycles ranged from 31,000 to 35,000. Using this equation, estimate how much it would cost Goldstein to manufacture

35,000 bicycle frames. How much more or less expensive would it be to manufacture the frames in

instead of purchasing them from Ryan?