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Rearrange the cost-capacity equation (see page 33 of your study guide) to make the scaling factor (n) the subject of the formula. 3.2. Using the data given, plot a graph of the natural logarithm of capacity vs. the natural logarithm of the fixed capital investment. Explain why such a graph is useful in finding the value of the scaling factor. 3.3. Determine whether the six-tenth rule applies in this case. If the six-tenth rule is not applicable, determine the relationship between the cost and capacity (i.e. the scaling factor).  3.4. Comment on the “economy of scale” of these biogas plants. 3.5. Calculate the fixed investment cost of a 4 500 m3 biogas plant in 2015. 3.6. Comment on the accuracy of such a cost estimate. Cost Index 2009: 521.9 Cost Index 2015: 556.8.

Operation Management, Management Studies

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