Wagner Corporation Can Manufacture 490,000 Tennis Rackets a Year at a Variable

question 3

Multiple Choice

Wagner Corporation can manufacture 490,000 tennis rackets a year at a variable cost of $15 per racket and at the fixed costs of $500,000. Wagner budgeted that it can sell 400,000 at $25 each. An additional order of 100,000 was received, but at a discount of 35% from the regular price. The relevant cost to Wagner of the special order is:

• A)$1,500,000
• B)$1,450,000
• C)$1,625,000
• D)Some other amount

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Definitions:

Independent Variables

Variables in an experiment or model that are manipulated or categorized to observe their effect on dependent variables.

Goodness of Fit

A statistical test used to determine how well observed data match the expected data from a model.

Estimated Regression Equation

The estimate of the regression equation developed from sample data by using the least squares method. For simple linear regression, the estimated regression equation is yˆ = b0 + b1x.

Multicollinearity

A statistical phenomenon in which two or more predictor variables in a multiple regression model are highly correlated, making it difficult to distinguish their individual effects on the dependent variable.