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Mller's Dairy Limited produces luxury cheese. The total units of output and corresponding total costs for the year 2015 were as follows: Month Units of

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Mller's Dairy Limited produces luxury cheese. The total units of output and corresponding total costs for the year 2015 were as follows: Month Units of Output Jan. 2015 Feb. 2015 Mar. 2015 Apr. 2015 May 2015 Jun. 2015 Jul. 2015 Aug. 2015 Sep. 2015 Oct. 2015 Nov. 2015 Dec. 2015 850 540 760 900 500 950 710 800 1.000 660 960 600 550 500 650 650 400 750 550 700 600 550 800 600 Requirement a) Calculate the cost function for the year 2015, using: (i) the graphical (-scattergraph) method (ii) the high-low method. Plot the cost function you obtained from the high-low method into the diagram. 14 Marks b) Describe one advantage of each of the two above-mentioned methods. 4 Marks c) Discuss the criticisms of the graphical and high-low methods. To what extent can the least squares method for cost estimation overcome the articulated shortcomings? 7 Marks Total 25 Marks

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