
Post by yacine on May 8, 2020 11:40:38 GMT
Hi guys, i'm currently subscribed to this site passtest academy and they have a hard question on linear regression which i don't understand.



Post by yacine on May 8, 2020 12:48:24 GMT
Here is the answer given, can anyone tell me how they derived their figures? i'm still scratching my head on how they get the solution.



Post by mjthetutor on May 19, 2020 2:49:26 GMT
Hi yacine.... So this is how they got there: Based on contribution, our ranking of the products is: to make B first, C second and A last. When we look at the optimum production, we are already making: 1,200 units of Product B are produced = 600 hours 2,500 units of Product C are produced = 7,500 hours Total = 8,100 hours With the additional 2,000 hours, we can make the rest of C, which calculates at 500 units x 3 hours/unit = 1,500 hours. That leaves us with 500 hours to spend on A, which takes 2 hours/unit to make = 250 units. We would then calculate the contribution we get for the 2,000 hours. That would be 500 B units x $8.40 = $4,200 and 250 A units x $5 = $1,250. This totals $5,450. However, this contribution amount is only gotten to in normal terms (as if we had made them). Since we didn't produce these products using our resources, we should be willing to pay the costs that it takes to produce them (on top of the contribution amount). Costs calculation starts with 500 B units x $2.10 = $1,050 and 250 A units x $1.40 = $350. Total $1,400. So the maximum that we should pay for getting the 2,000 hours extra externally is $6,850 ($5,450 + $1,400). Hope this helps. If you need more practice and are looking for additional resources, why not try Astranti's P1 OT exam practice kits?

