Cost Analysis Report

  
Competency
Elasticity, consumer choice, utility, productivity, and nature of costs.
Course Scenario
Oil Company X is a large oil refinery which has been expanding and  taking on new investment projects. Recently, they have considered  building a pipeline that stretches across the United States, from Canada  to New Orleans.
You are a member of the Cost Department. At a recent meeting of the  board of directors, it was estimated that the cost of building the  pipeline would be two million dollars in total for the production of a  30,000-mile stretch, $5,000 of which is a fixed cost in taxes. They also  want you to determine if the currently available alternative energy  source is a strong substitute good for oil, which may interfere with  expected profits from this venture.
Instructions
As a cost analyst at your firm, you are asked to evaluate the  marginal cost of producing the pipeline per 1,000-mile stretch as well  as the average total cost of producing the pipeline per 1,000 miles.  Submit a 2-page report detailing the cost. Include calculations in your  Word document.
You will also include a table showing the final figures for the following costs:

Total Fixed Cost
Total Variable Cost
Average Variable Cost
Average Fixed Cost
Marginal Cost

Please use this included Excel Cost Spreadsheet to calculate your costs.
Be sure to also include a calculation of the cross-price elasticity  of the alternative energy source and oil. Assume the current price of  oil is $50/gallon. If the price increases to $55/gallon of crude oil,  the quantity demanded of the alternative energy source increases by 20%.
Is this a complementary good, a substitute good, or a non-related  good? If there is a relationship, indicate whether the relationship is  weak or strong. Justify your answer with an explanation.
Format your proposal to include a title page, introduction,  conclusion, and references. Include all relevant graphs, equations, and  calculations. Show your work on calculations to ensure you receive  partial credit for incorrect answers. No credit will be given if your  work is not shown. Remember to cite your sources using correct APA  format, and also use correct grammar, spelling, and formatting.

The spreadsheet for the assignment is attached file.

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