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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › regression analysis and time series
the overhead cost for RP Limited have been found to be accurately represented by th fomula
Y=$10000+$0.25X
where Y is the monthly costs and Xrepresents the activity level measured as number of orders.
Monthly activity levels of orders may be estimated using a combined regression analysis and a time series model
a=100000+30b
where a represents the de-seosonalised monthly activity level and b represents the month number.
In month 240 the seasonal index value is 108
REQUIRED
Calculate the overhead costs for RP Limited for month 240 to the nearest $1000
In the formula a = 10000 + 30b, put b = 240 and so you get a = 17200
The seasonal index is 108, so adjusting for seasonality gives 108/100 x 17200 = 18576
Put this figure for X in the first formula and you will get the cost.