blue ridge ice cream company produces ten varieties of ice
blue ridge ice cream company produces ten varieties of ice cream in large vats, several thousand gallons at a time. the ice cream is distributed to several categories of customers. some ice cream is packaged in large containers and sold to college and university food services. some is packaged in half-gallon or small containers and sold through wholesale distributors to grocery stores. finally, some is packaged in a variety of individual servings and sold directly to the public from trucks owned and operated by blue ridge. management has always assumed that costs fluctuated with the volume of ice cream, and cost-estimating equations have been based on the following cost function: estimated costs = fixed costs + variable costs per gallon x production in gallonslately, however, this equation has not been a very accurate predictor of total costs. at the same time, management has noticed that the volumes and varieties of ice cream sold through the three distinct distribution channels have fluctuated from month to month.required a. what relevant major assumption is inherent in the cost-estimating equation currently used by blue ridge? b. why might blue ridge wish to develop a cost-estimating equation that recognizes the hierarchy of activity costs? explain. c. develop the general form of a more accurate cost-estimating equation for blue ridge. clearly label and explain all elements of the equation, and provide specific examples of costs for each element.
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