Question $1[9$ marks$][$CO$3,$ CO$5,$ Module $1$: MO$3,$ MO$5]$

Fraser River Manufacturing has been trying to understand their costs for the current period and to help them determine the budgeted unit cost for manufacturing for next year. The accountant has provided you with the following information for the past six months:

Production in

Month $|$ Cost $|$ Units

July $|$ $$49,011|22,200$

August $|58,750|26,400$

September $|85,245|40,500$

October $|76,400|31,000$

November $|62,500|29,000$

December $|86,851|39,800$

Required:

a$)$ Using the high$-$low method, determine the cost function for production cost for Fraser. $[4$ marks$]$

b$)$ Using regression analysis, determine the cost function for production cost for Fraser. $($See Regression output below$)[2$ marks$]$

c$)$ If they were expecting to produce $27,500$ units in January, what would the estimated cost be under each method $($high$/$low and regression$)?$ Which would you recommend Fraser use? Why? Are there any other considerations you would make in determining the

estimated cost for January? $[3$ marks$]$