Micky Ltd produces a single product. The company’s directors want to explore new markets, and they require an accurate analysis of the firm’s cost structure for both forecasting and pricing purposes. An attempt to provide this analysis from the aggregation of individual costs has produced a poor correspondence between actual and predicted costs. You are an accountant employed by Skies Ltd, and you have been asked to provide a statistical approach to the problem. The financial director has given you the following data:

Period	Output (units)	Average unit cost (GHS)
July	9,000	12.8
August	14,000	13
September	11,000	11.4
October	8,000	12
1November	6,000	13
December	12,000	11.7

You obtain the following further information:

• The costs from which the averages have been computed consist of the firm’s entire costs for the relevant month.  
• Fixed costs can be assumed to be unaffected by seasonal factors except for harmattan heating. In July and August a supplementary heating system was employed;   this cost GHS 10,000 per month to operate.

Required:

Estimate Micky Ltd.’s normal fixed and variable cost of production using linear regression Graph.  

Answer rating: 100% (QA)

6 answers Month Units a Avg Unit Cost b Total Cost ab Heating System Cost Total Cost excluding Heati... View the full answer