Question

Subject: Managment accounting

a) Odino chemicals limited are aware that its power costs are semi variable cost and over the last six months these costs have shown the following relationship with a standard measure of output.

Month	Output (standard units)	Total power costs £ 000
1	12	6.2
2	18	8.0
3	19	8.6
4	20	10.4
5	24	10.2
6	30	12.4

Required Using the method of least squares, determine on appropriate linear relationship

Answer 1

SUMMARY OUTPUT
Regression Statistics
Multiple R	0.956436
R Square	0.91477
Adjusted R Square	0.893463
Standard Error	706.4128
Observations	6
ANOVA
	df	SS	MS	F	Significance F
Regression	1	21423924	21423924	42.93207	0.002805
Residual	4	1996076	499019.1
Total	5	23420000
	Coefficients	Standard Error	t Stat	P-value	Lower 95%	Upper 95%	Lower 95.0%	Upper 95.0%
Intercept	2295.368	1107.257	2.073021	0.106864	-778.871	5369.607	-778.871	5369.607
Output	341.6894	52.14835	6.552257	0.002805	196.9024	486.4764	196.9024	486.4764

Relationship = £341.69 x + £2295.37