Phathela Transport (Pty) Ltd is a transport company, specializing in long haul transport throughout Southern Africa. The managing director is concerned about the company's cost structure as Phathela Transport's actual costs differ quite considerably from the company's cost budget. The managing director consulted your services to advise regarding their cost estimation for the following 6 months. He provides you with the following cost budget.

Cost (Y)Number of tripsAmount of km's (X)

(R)

January 22500257400

February20500256350

March17500155500

April24800258250

May16000205000

June23000228000

a)Determine the cost equation using the Least Squares Regression (Statistical) method.

Use the following formulae to determine the variable cost per unit and fixed cost.

m = n(sum(xy)) - (sumx)(sumy) n(sumx) - (sumx)

c = (sumy) - m(sumx)

n

(10 marks)

(2 marks)

b)What advice would you give the managing director of Phathela Transport regarding his cost estimation for the following 6 months?