QUESTION FOUR

a$)$ Briefly explain the following cost estimation methods

i$.$ High low method

$(2$ Marks$)$

ii$.$ Simple regression method

$(3$ Marks$)$

b$)$ The management of Limuru Processing Company limited wishes to obtain better cost estimates to evaluate the companys operations more effectively

The following information is provided to you for analysis:

$\backslash$begin$\{$tabular$\}\{|$l$|$l$|$l$|\}$

$\backslash$hline Month & Units & Overhead $\backslash \backslash$

$\backslash$hline $1$ & $425$ & $121\backslash \backslash$

$\backslash$hline $2$ & $950$ & $987\backslash \backslash$

$\backslash$hline $3$ & $113$ & $104\backslash \backslash$

$\backslash$hline $4$ & $169$ & $152\backslash \backslash$

$\backslash$hline $5$ & $100$ & $991\backslash \backslash$

$\backslash$hline

$\backslash$end$\{$tabular$\}$

Required

i$.$ Use the high $-$low method to estimate the overhead cost function

$(4$ Marks$)$

ii$.$ Use the regression method to determine the overhead cost function

$(6$ Marks$)$