Page 183 - P1 Integrated Workbook STUDENT 2018

Forecasting

Example 3

Jayco has used linear regression to determine the following information for its
cost data:

a = 5,280

b = 9.98

r = 0.9

Using linear regression, predict costs for month 1 next year when output
is predicted to be 3,000 units.

Ignore any inflation.

Solution

Cost prediction = fixed cost + variable cost per unit × no. of units

Y = a + bx

Y = $5,280 + $9.98 × 3,000

Y = total cost = $35,220

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