Question
Sahana is asked to estimate future monthly purchase costs for material no. 344 used in the factory. Sahanas purchase and quantity data for the past
Sahana is asked to estimate future monthly purchase costs for material no. 344 used in the factory. Sahanas purchase and quantity data for the past nine months are as follows: Month Cost of purchase Quantity purchased January $12 675 2 710 metres February 13 000 2 810 March 17 653 4 153 April 15 825 3 756 May 13 125 2 912 June 13 814 3 387 July 15 300 3 622 August 10 233 2 298 September 14 950 3 562 Estimated monthly purchases for this material, based on expected demand of products for the rest of the year, are: Month Purchase quantity expected October 3 340 metres November 3 710 metres December 3 040 metres Required a) The computer in Sahanas office is down, so you are asked to help her to prepare a cost function to estimate the future purchase cost for material no. 344 using the highlow method. 15 marks b) Using the equation from requirement 1, calculate the future expected purchase costs for each of the last three months of the year. c) After a few hours the computer is fixed and you can use it to determine the cost function using regression method to estimate future purchase cost for material 344 and obtain the cost function: y = $2 582.57 + 3.54X. Using the regression results, calculate the expected purchase costs for October, November and December. Compare the expected purchase costs with the expected purchase costs calculated using the highlow method in requirement b. Comment on your results
Please show all calculations and steps
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