Preparing Forecasts

Question 0

Line of best fit

Answer 0

• Y = a + bX
• dependent variable = Y axis intercept + gradient (independent variable)

Y = total cost 
X = level of activity
a = fixed cost 
b = variable cost per unit of activity

Question 1

Linear regression analysis (least squares technique)

Answer 1

Statistical method

Estimates costs using historical data from a number of previous accounting periods