Kane's business is producing a single product K. He collected the following information between production volume...

   

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Kane's business is producing a single product K. He collected the following information between production volume and maintenance costs, and now he is finding whether there is a linear relationship between them of his business. Figures for the last five months are as follows: Production Volume (x) Month 1 2 3 4 5 Total 34 درادا 75 115 190 60 135 Ex=575 Maintenance Costs (y in value of f) 250 310 400 240 355 Στ= 1.555 Further information is available as follows (the value are given in £): Exy = 192,725; Ex²=76,775; Ey² = 502.225; (Ex)² = 330,625; (Ey)² =2,418,025 Kane also prepared the budget for production and sales of the Product K, which will be 2,000 units for the forthcoming year. At this level of activity, the unit full cost of K is budgeted to be £700, including the allocated fixed cost of £200/unit. He estimates that the demand of K would follow on a linear relationship with its unit selling price. Specifically, the demand of K would increase 100 units for every decrease of £10 in unit selling price (and vice-versa), and that at a unit selling price of £1,000 then no market demand exists. You are required to calculate, in respect of Kane's business (The formula is on front page): a).Please both use the High-Low method and Least-squares method to estimate the cost function between level of production and maintenance costs, and give short comments that which technique is more reliable and why (keep two decimals for the results). b). Please calculate the budgeted contribution and profit at the budgeted level of sales of 2,000 units of K. c). Please Calculate the following: i. The price per unit of K should be set in order to maximize the annual profit of business. ii. The amount of the maximum profit. 8 5 7 Kane's business is producing a single product K. He collected the following information between production volume and maintenance costs, and now he is finding whether there is a linear relationship between them of his business. Figures for the last five months are as follows: Production Volume (x) Month 1 2 3 4 5 Total 34 درادا 75 115 190 60 135 Ex=575 Maintenance Costs (y in value of f) 250 310 400 240 355 Στ= 1.555 Further information is available as follows (the value are given in £): Exy = 192,725; Ex²=76,775; Ey² = 502.225; (Ex)² = 330,625; (Ey)² =2,418,025 Kane also prepared the budget for production and sales of the Product K, which will be 2,000 units for the forthcoming year. At this level of activity, the unit full cost of K is budgeted to be £700, including the allocated fixed cost of £200/unit. He estimates that the demand of K would follow on a linear relationship with its unit selling price. Specifically, the demand of K would increase 100 units for every decrease of £10 in unit selling price (and vice-versa), and that at a unit selling price of £1,000 then no market demand exists. You are required to calculate, in respect of Kane's business (The formula is on front page): a).Please both use the High-Low method and Least-squares method to estimate the cost function between level of production and maintenance costs, and give short comments that which technique is more reliable and why (keep two decimals for the results). b). Please calculate the budgeted contribution and profit at the budgeted level of sales of 2,000 units of K. c). Please Calculate the following: i. The price per unit of K should be set in order to maximize the annual profit of business. ii. The amount of the maximum profit. 8 5 7

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a Estimating the Cost Function To estimate the cost function between the level of production and maintenance costs we will use both the HighLow method and the LeastSquares method HighLow Method Lets u... View the full answer