Problem 2: Mr. Abebe is the new manager of the purchasing department for ABC Manufacturing. Mr. Abebe has been asked to estimate future monthly purchase costs for raw material X, used in two of ABC’s products. Mr. Abebe has purchase cost and quantity data for the past nine months as follows:

Month Quantity purchased Cost of Purchase

January 2,700 12,468

February 2,820 12,660

March 4,068 17,280

April 3,744 15,816

May 2,988 13,164

June 3,216 13,896

July 3,636 15,228

August 2,316 10,272

September 3,552 14,940

Estimated monthly purchases for this part based on expected demand of the two products for the rest of the three months are as follows:

Month Quantity purchased

October 3,360

November 3,720

December 3,000

Formulate the cost function used for forecasting under each of the following methods and forecast cost of purchase for the remaining three months using

a) High low method

b) Regression method