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The production manager of Kemu ltd Company, is concerned abut the apparent fluctuation in efficiency and wants to determine how labour costs (in Sh.) are...

The production manager of Kemu ltd Company, is concerned abut the apparent fluctuation in efficiency and wants to determine how labour costs (in Sh.) are related to volume. The following data presents results of the 12 most recent weeks.
kemu2a1742019835.png
kemu2b1742019836.png

Required:
Estimate the cost function using:
a) The high low method
b) Regression analysis
Assume that the Company intends to produce 45 units, 34 units next period
Estimate the labour cost to be incurred.
c) Assume that the company (in illustration 2.1) intends to spend Sh.400 on labour cost next period. Compute the number of units that the company may produce.

Answers

Wilfred
a) High low method

kemu2c1742019839.png

b) Regression analysis
We first compute the sum of X, Y, XY, X2 and Y2 The table below shows these summations.
kemu2d1742019842.png

c)
Y = a + bx is a regression of Y on X i.e. Y = f(x)
We require a regression of X on Y. i.e. X = g(Y) to answer the above question. The general format of the equation is:
X = a1 + b1Y
kemu2e1742019842.png

Wilfykil answered the question on April 17, 2019 at 05:46

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