Operations Management, Planning Techniques, Forecasting Techniques - 250

What is the cost equation necessary for calculating regression or the high-low method?The relationship between fixed costs, variable costs, and total costs expressed as a regression equation: y = A + Bx

where:

y = total costs (dependent variable)

A = fixed costs (the y intercept)

B = variable cost per unit (the slope of the line)

x – number of units (independent variable)

or Total costs = Fixed costs + (Variable cost per unit X Number of units)