Financial performance Sample CBT 2 from 2013  Task 1.5 regression
Rosierabbit
Registered Posts: 17 Regular contributor ⭐ 😼 ⭐
Hi All can anyone help with the above question please. We are given the following information :
Production cost for MIN2 are semi variable. company uses regress Y = a+bx
Y total cost,
X unit cost
A fixed element
B variable element
Data :
8000 units 52000 total cost
12000 units 72000 total cost
13500 79500 total cost
Use above data to calculate A and B
Answer A is 12000
Answer B is 5
Any help appreciated
Thank you all
Rosie x
Production cost for MIN2 are semi variable. company uses regress Y = a+bx
Y total cost,
X unit cost
A fixed element
B variable element
Data :
8000 units 52000 total cost
12000 units 72000 total cost
13500 79500 total cost
Use above data to calculate A and B
Answer A is 12000
Answer B is 5
Any help appreciated
Thank you all
Rosie x
1
Comments

Ignore the bit about the regression equation, you can use it if you want to but it's basically the high/low technique.
High 13,500 unit 79,500 cost
Low 8,000 units 52,000 cost
Diff 5,500 units 27,500 cost. Unit cost (ie variable element) = 5
Then plug that back into any of the known levels of production:
8,000 units x 5 = 40,000 variable
total cost 52,000
so fixed cost is the difference, 12,000
Try it any of the 3 levels of production, it will work1
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