The Controller for Truman Canoes Has Gathered the Following Cost

question 235

Essay

The controller for Truman Canoes has gathered the following cost and activity level information:

Required:
1.What is the total cost of producing 2,000 fiberglass canoes?
2.What is the variable cost of producing each fiberglass canoe?
3.Suppose the controller uses the average cost to predict total costs.What total cost would the controller calculate for 3,000 fiberglass canoes?
4.If the controller uses the cost equation to predict total costs,what total cost would the controller calculate for 3,000 fiberglass canoes?
5.Is there a difference between the forecasted total cost using average cost versus the cost equation? If there is a difference,what creates the difference? If there is no difference,when would there be a difference?

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Definitions:

Random Variation

Fluctuations in data or experimental results due to unpredictable changes in variables or conditions.

Time Series

A sequence of data points collected or recorded at successive points in time, often analyzed to identify trends, cycles, and seasonal variations.

Three-period Moving Averages

A method used in time series analysis to smooth out data by calculating the average of any three consecutive periods to predict trends or identify patterns.

Principle of Parsimony

A principle stating that among competing hypotheses, the one with the fewest assumptions should be selected.