In practice there is no cost that can be described as, entirely and always variable or fixed."

Comment on the above statement.(2 marks)

(b) By way of explanatory notes, briefly explain why you agree or do not agree with the following statement:

"The term forecast can be used to mean budget".(2 marks)

(c) The information given below relates to Wasp Ltd. which manufactures a single type of chemical. Overhead processing costs for the last thirteen accounting months (of four weeks each) have been as follows:

Period

Overhead cost

Sh. "000"

Output

"000"tonnes

1

770

120

2

820

150

3

810

160

4

830

170

5

960

200

6

900

170

7

940

200

8

950

200

9

940

180

10

870

160

11

800

140

12

820

150

13

790

140

Required:

Use linear regression analysis to devise a formular to assist in predicting the overhead budget for the thirteen months.