£5,000 = a + (200 x b)£14,000 = a + (2,000 x b)

£14,000 - £5,000 = (a + (2,000 x b)) - (a + (200 x b)) = a + (2,000 x b) - a - (200 x b)£9,000 = 1,800 x b

£14,000 = a + (2,000 x 5) a = £14,000 - £10,000 a = £4,000

## Comments

177A business's production costs vary linearly according to the regression equation y=a+bx,

where x = production volume. Total production costs of 200 units and 2,000 units are £5,000 and £14,000 respectively.

Calculate the values of a and b.

Value of a -------------

Value of b -------------

17Substituting b = 5 into either of the equations can be used to find b.

7977Task 4

The following budgeted figures refer to a factory producing a single product. Overheads are absorbed on a budgeted production basis.

Inventory is valued on a FIFO basis.

Month 1 Month 2 Month 3

Operating inventory (units) 0 - -

Selling price (£) 110 100 90

Production (units) 10,000 10,000 10,000

Sales (units) 8,000 9,000 11,000

Direct materials (£ per unit) 15 15 15

Direct labour (£ per unit) 10 10 10

Other variable prod cost (£) 230,000 230,000 230,000

Fixed prod cost (£) 450,000 450,000 450,000

Complete the table below. If any answer is zero, enter 'o' into the relevant cell

For the sales to fixed overheads rows, use positive numbers only (do not use minus signs).

For the final row, record any loss figure with a minus sign.