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Maciej says

19:49 Sir, I cannot understand why we have 67,86 instead of 678,6. We calculated number of units in hundreds, so shouldn’t we multiply 6,786 by 100? There is no doubt that 6,786*100=678,6. Could you tell me why I am wrong? 🙂

Fedor Belyakov says

Good day Dear John,

In simpple words can we say that….

After all calculation we assume that fixed cost remain the same and varibale cost increase in linear relation to quantity of produced items.

And the only problem can be that

In real life,for exmaple electricity supplier can increase varibale cost per unit after some Kilowats consumed.But our current calculation does take into accounts this factor.

Kindly asking for your advice

Thanks,

Fedor

John Moffat says

Costs can be fixed or variable or semi-variable (part fixed and part variable).

The cost per unit certainly can change over different ranges of units, and so can the fixed cost (which is then a stepped cost).

We can deal with all of them (and could well be asked to in the exam – but not as part of a question on regression analysis).

This is all explained in the lecture that goes with Chapter 4 of our lecture notes. (The lectures are supposed to be watched in number order 🙂 )

Jegan says

Thank you sir, much appreciated 🙂

Jegan says

I calculated from this question that was in the revision lecture for the topic Semi-Variable Costs: Regression:

b = 67.86 (2 d.p.)

a = 32857.14 (2 d.p.)

Is this correct?

John Moffat says

You can see from the lecture and from the printed answers that it is correct!!

kassy says

hello! i am sorry about my silly question but i noticed that:

we write: a=60 – (6.78*28)/7 = 60-27.12= 32.88

but as we can see 60 is actually 60.000 and 28 is actually 2.800. (and not 28000 as we took it above)

so it gives us a=60000 – (6.78*2800)/7= 60000- 2712=57.288

or maybe not?

kassy says

dont waste your time, i fixed it!!!

John Moffat says

I was just about to reply and explain, but you save me the time 🙂

Glad you fixed it!