We are willing to estimate profit function for dairy processing unit. As profit is a function of output price (py) and input price (px). Under input prices included price of raw material, other ingredients, labour cost and transport cost......., whereas we have three dairy products such as Ghee, Paneer and Dahi. The prices and input-output coefficients are different for these products. Can we take a combined output price (py) for all products based on conversion ratio and can fit regression model
It seems that you might be looking only at operational costs and not all costs in the models. Are you including depreciation of equipment and facilities, taxes, etc.? If not, then your model will not be accurate regardless of whether you treat each product separately or pool them.
Instead of using regression, you might want to consider using linear programming with the objective to minimize the total error. The total error being the difference between the actual and estimated number. I have used this approach when trying to ascertain cost coefficients on multiple facilities to estimate what the profitability should be.
Please provide some more detail as to the various coefficients, unit costs and unit profits.
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