Run a regression to estimate the average variable cost

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Reference no: EM131773481

Assignment -

ZANCATEX produces garments, specifically Shirts for men. This is one of many firms that produce a homogeneous product, and none of them uses Advertising to publicize your product. By the beginning of December 2016, the administrator of this company must prepare the production plan for the first quarter of next to ~ no. For this, it was necessary to first estimate the possible market prices of the shirts for that time. According to those estimates, the firm could establish the production volume.

The marketing management estimated three possible scenarios for the next quarter. Those Prices (per shirt) were: Scenario 1: $ 28; Scenario 2: $ 36; and, Scenario 3: $ 48. Using information on production and costs, the company wants to estimate its variable cost medium using the following quadratic specification:

AVC_t = a + bQ_t + cQ²_t+ error_t

Where: AV Ct is the average monthly variable cost in the quarter t and, Qt is the amount produced and sold in the quarter t. The data of AVC and Q are shown in the following Table: Quarter

Trimestre	AVC	Q
2014-3	$36.26	300
2014-4	37.33	100
2015-1	27.11	150
2015-2	26.89	250
2015-3	45.10	400
2015-4	31.34	200
2016-1	42.24	350
2016-2	55.13	450
2016-3	61.73	500

It is also known that the monthly total cost (TFC) of ZANCATEX, Inc. amounts to $2,000 per month. It is also known that the market salary is $ 10 per hour.

a) Run a regression to estimate the average variable cost (AVC) function.

Evaluate the statistical significance (p-values) of the three estimated parameters using a signification level of 5% [Present your results using the format of summary used in the quiz of module 3]. Be sure to comment on the signs Algebraists of the three estimates of the parameters [Hint: see the help of this module].

b) Using the AVC (estimated) found in the first question1, calculate the cost total (TC), total variable cost (TVC), average total cost (ATC) and marginal cost short term (SMC) of Zancatex. In the same table you must compute the number of workers2, the marginal product of labor (MP), and, the average product of work (AP). [Hint: Before doing these calculations, order Q from minor to major3, and AVC (estimated) has to be aligned with its production level].

c) Present in a graph ca 5 ATC (estimated), AVC (estimated) and SMC (estimated) [ATC (estimated) and SMC (estimated) are found in 2)]. > They look like the functions of ATC, AVC and SMC that presents the theory? [Remember that the level of production (Q) it goes on the abscissa axis (X) and the other variables on the ordinate axis (Y)]

d) If Scenario 3 is fulfilled, should the rma produce or not? And if it produces, that production level would it be? Also, if the company produces, finds its benefit economic. Use the production rule for your answer [And the table I use to make the crane c in c)]

e) Assuming that we are in Scenario 2, present in a graph ca 6, the value of the marginal product (MRP) and the mean average value (ARP). To find these variables must multiply the price of Scenario 2 by MP and AP, respectively. [Remember that the number of workers (L) goes on the abscissa axis (X) and the other variables on the ordinate (Y)].

f) If Scenario 2 is fulfilled, should the operation operate or not? And if it operates,> how many workers should hire? Use the contracting rule for your response. [And the table that I use to make the graphic ca in e)]

Reference no: EM131773481

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