Question
B-TEC Ltd. produces a wide range of electronic components. The company is preparing budgets for the financial year 2017. The management accountant has obtained the
B-TEC Ltd. produces a wide range of electronic components. The company is preparing budgets for the financial year 2017. The management accountant has obtained the following data on component X, a key element in the master budget:
Sales for the year 2017 have been estimated at 260,000 units. Required: i) Using linear regression, project the trend and estimate the contribution for the year 2017. ii) Calculate the 95% confidence interval of the contribution forecast for the year 2017 in (i) above, given the standard error of the forecast is Sh. 14,500 and the t-value is 4.303. Interpret your answer. iii) Critic the use of regression analysis in forecasting.
\begin{tabular}{|l|l|l|l|l|} \hline Year & 2013 & 2014 & 2015 & 2016 \\ \hline Sales(units) & 150,000 & 180,000 & 200,000 & 230,000 \\ Salesrevenue(Sh) & 294,820 & 346,706 & 363,000 & 448,800 \\ \hline Variablecosts(Sh) & 132,820 & 162,706 & 179,000 & 200,800 \\ \hline \end{tabular} \begin{tabular}{|l|l|l|l|l|} \hline Year & 2013 & 2014 & 2015 & 2016 \\ \hline Sales(units) & 150,000 & 180,000 & 200,000 & 230,000 \\ Salesrevenue(Sh) & 294,820 & 346,706 & 363,000 & 448,800 \\ \hline Variablecosts(Sh) & 132,820 & 162,706 & 179,000 & 200,800 \\ \hline \end{tabular}Step by Step Solution
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