QUESTION 1 The question consists of two unrelated parts, Part A and Part B. PART A The management accountant of WeTheBest Ltd (an entity that manufactures a standardised piece of equipment for the mining industry) is of the opinion that the entity needs to improve the accuracy of its production overhead estimates and is considering using the high-low technique or linear regression analysis to accomplish this and then apply the results to their cost estimation in the 2023 financial year. Financial year 2019 Production overheads (R) 145 000 Production volume (Units) 1 050 The management accountant has extracted production overhead costs from the ledger for the last 4 financial years and obtained the related production volumes. 2020 140 000 550 2021 190 000 1 300 (36 marks) 2022 210 000 1 500 (20 marks) The entity expects to produce 1 400 units in the 2023 financial year.

The question consists of two unrelated parts, Part A and Part B. PART A (20 marks) The management accountant of WeTheBest Ltd (an entity that manufactures a standardised piece of equipment for the mining industry) is of the opinion that the entity needs to improve the accuracy of its production overhead estimates and is considering using the high-low technique or linear regression analysis to accomplish this and then apply the results to their cost estimation in the 2023 financial year. The management accountant has extracted production overhead costs from the ledger for the last 4 financial years and obtained the related production volumes. The entity expects to produce 1400 units in the 2023 financial year. 1.1 Formulate a cost equation for estimating production overheads in the 2023 financial year using the least squares method. Use the following equations: y=Na+bxxy=ax+bx2 (9 marks) 1.2. Formulate a cost equation for estimating the production overheads in the 2023 financial year by using the high-low method. (6 marks) 1.3. Explain why your answers in question 1.1. and 1.2. differ. (3 marks) 1.4. Calculate the total cost for the 2023 financial year if 1400 units are produced. Use the cost equation that you formulated in 1.1 . (2 marks) Round to two decimals where applicable