- 15 Marks
ICMA – Nov 2024 – L1 – Q5a – Cost Segregation and Estimation
Determine fixed and variable cost components using regression analysis and estimate total cost for a given production level.
Question
Ebo LTD is planning to determine its variable and fixed cost elements for its planned activity level for the next year. The company has recorded the following costs and production units in the past six months:
| Month | Units (X) | Cost (Y) |
|---|---|---|
| January | 5.8 | 40.3 |
| February | 7.7 | 47.1 |
| March | 8.2 | 48.7 |
| April | 6.1 | 40.6 |
| May | 6.5 | 44.5 |
| June | 7.5 | 47.1 |
Required:
i) Construct the least square regression model.
ii) Determine the variable cost per unit of output using the model.
iii) Determine the fixed cost for the month using the model.
iv) Estimate the total cost if the company plans to produce 6,200 units.
Find Related Questions by Tags, levels, etc.
- Tags: Cost Estimation, Fixed Cost, Least Squares Method, Regression Analysis, Variable Cost
- Level: Level 1
- Topic: Cost Segregation and Estimation
- Series: Nov 2024