Question

b) The following data relates to output and total cost of Simba Moja limited over the past 6 months period; Period 1 2 3 4 5 6 Outputs (Units'000') 12 13 11 14 13 15 Total costs (Sh'000") 900 1,100 700 1,300 1,100 1,500 REQUIRED Using the linear expression of the form Y=a+bx, compute the variable cost per unit and fixed cost using 1). High-low method (3 Marks) ii). Regression analysis (3 Marks) iii) What will be the total cost for the 7 month if output is 17,000 units? (2 Marks)

Answer 1

i High low method: high cost low cost = 1500 = 700 at at 15 units 11 units Variable cost per unila 1500-700 15.11 800 = variable cost = 200 per unit calculation of fixed cost Total costs Fixedc Et variable coste No.of units/ iseo Fixed cost tis)x200)] 1500, fired cost + 200X H) 1560 = Fixed cost +800 fixed cost = 1500-800 Fixed cost = Foo Scanned with CamScanner

(i) Regression analysis: Ya atba y=dependent variable x = independent variable a a intercept ba slope variable cost = 1500 - goo = 600 variable cost pen change f 15-18 Ivariable cost = 200 per unit/ Change calculation of fixed cost- cost Total cost = Fixed cast tvariable 1500 = Fixed cost + 3(200) Fixed cost = 900] Scanned with CamScanner

(121) Given Dutput at 7 month = 17en units Total cost= fined tvariable = fired +67-12)x200] - fixed + 1000 2 900 +1000 Total cost = 1900 Scanne Scanned with CamScanner
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