Question $3-$ Part B

Required:

a$)$ The computer in Mansur's office is down, and Mansur has been asked to immediately provide an equation to estimate the future purchase cost for part ABC. Mansur grabs a calculator and uses the high$-$low method to estimate a cost equation. Construct the equation.

$(4$ marks$)$

b$)$ Using the equation from requirement $($a$),$ compute the future expected purchase costs for each of the last $3$ months of the year.

$(1\mathrm{.}5$ marks$)$

c$)$ After a few hours Mansur's computer is fixed. Mansur uses the first $9$ months of data and regression analysis to estimate the relationship between the quantity purchased and purchase costs of part ABC. The regression line and result are as follows:

$y=RM2,135\mathrm{.}5+3\mathrm{.}67x,+C=-7,264+4x$

$R^2=0\mathrm{.}9854$

Evaluate the regression line using the criteria of economic plausibility, goodness of fit, and significance of the independent variable. Compare the regression equation to the equation based on the high$-$low method. Which is a better fit? Interpret your answer. $(6$ marks$)$

d$)$ Use the regression results to calculate the expected purchase costs for October, November, and December. Compare the expected purchase costs to the expected purchase costs calculated using the high$-$low method in requirement $($b$).$ Interpret your results.