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CIMA BA2 – Regression analysis
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the last example after 60-27.1428 /7 but you did not divide am I correct
If we’re multiplying 32.8572 x 1000 = 32,857.2
And if we’re multiplying 6.7857 x 100 = 678.57
The answer for ‘b’ in the notes and this lecture slide are written as 67.9 – which I really do not understand how?
I know this is 5 years late, but new students can refer to this. The conversion of the formula from multiples is shown below:
Original formula: y = 32.86 + 6.79x
Where y = cost in 000s and x = units in hundreds
Step 1: Convert the y-intercept (fixed cost)
Original: a = 32.86 (in 000s)
Converted: 32.86 × 1,000 = $32,860
Step 2: Convert the slope (variable cost)
Original: b = 6.79 (cost in 000s per hundred units) – remember that “b” is VC per unit and when we substituted the values we used values of y which were cost in 000s, and x = units in hundreds. Hence, we consider both multiples used, and say “cost in 000s/hundred units”
Convert the 000s part:: 6.79 × $1,000 = $6,790 per hundred units
Conver the hundred units part to a single unit: $6,790 ÷ 100 = $67.90 per unit
Final formula
y = 32860 + 67.90x
I believe that b in the first example should have been 67.86 not 6.786, am i right?
I had worked it out as 6.7857 x 00’s = 678.57?