Page 54 - BA2 Integrated Workbook STUDENT 2018

Chapter 3

n∑xy – (∑x)(∑y) (4 × 1,877.5) – (45 × 163.9) 134.5
b = ——————— = ———————————— = ——— = 2.28
2
2
2
n∑x – (∑x) (4 × 521) − 45 59
So our variable cost per unit is $2.28. Using the high-low method, our answer was
$2.30.

a = y ̅ − b x ̅ = (163.9 ÷ 4) – [2.28 × (45 ÷ 4)] = 15.325

So our fixed cost is $15,325. Using the high-low method, our answer was $15,000.

Regression uses all of the observations rather than just the highest and lowest so
gives a better estimation of a and b.

Illustrations and further practice

Now try TYU 3

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