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A. What percentage of the variation in overhead costs is explained by the independent variable? B. What is the total overhead cost for an estimated activity level of 50,000 direct labor hours? C. How much is the variable manufacturing cost per unit, using the variable overhead estimated by the regression (assuming that direct materials and direct labor are variable costs)?

A. What percentage of the variation in overhead costs is explained by the independent variable? B. What is the total overhead cost for an estimated activity level of 50,000 direct labor hours? C. How much is the variable manufacturing cost per unit, using the variable overhead estimated by the regression (assuming that direct materials and direct labor are variable costs)?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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A. What percentage of the variation in overhead costs is explained by the independent variable?

B. What is the total overhead cost for an estimated activity level of 50,000 direct labor hours?

C. How much is the variable manufacturing cost per unit, using the variable overhead estimated by the regression (assuming that direct materials and direct labor are variable costs)?

D. What is the expected contribution margin per unit to be earned during the first year on 20,000 units of the new product? (Assume that all marketing and administrative costs are fixed.)

E. What is the manufacturing cost equation implied by these results?

Cortez Company is planning to introduce a new product that will sell for $96 per unit. The following manufacturing cost estimates have been made on 20,000 units to be produced the first year. Direct materials Direct labor $800,000 640,000 ($16 per hour 40,000 hours) Manufacturing overhead costs have not yet been estimated for the new product, but monthly data on total production and overhead costs for the past 24 months have been analyzed using simple linear regression. The following results were derived from the simple regression and provide the basis for overhead cost estimates for the new product. Simple Regrension Analysin Results Dependent variable-Factory overhead costs Independent variable-Direct labor-hours Computed values Intercept Coefficient on independent variable Coefficient of correlation $120,000 5.00 0.921 ances 0.848 Required: a. What percentage of the variation in overhead costs is explained by the Independent variable? O 92.10% O45.00% O 84.80% O8.48% O None of the above b. What is the total overhead cost for an estimated activity level of 50,000 direct labor-hours?
Transcribed Image Text:Cortez Company is planning to introduce a new product that will sell for $96 per unit. The following manufacturing cost estimates have been made on 20,000 units to be produced the first year. Direct materials Direct labor $800,000 640,000 ($16 per hour 40,000 hours) Manufacturing overhead costs have not yet been estimated for the new product, but monthly data on total production and overhead costs for the past 24 months have been analyzed using simple linear regression. The following results were derived from the simple regression and provide the basis for overhead cost estimates for the new product. Simple Regrension Analysin Results Dependent variable-Factory overhead costs Independent variable-Direct labor-hours Computed values Intercept Coefficient on independent variable Coefficient of correlation $120,000 5.00 0.921 ances 0.848 Required: a. What percentage of the variation in overhead costs is explained by the Independent variable? O 92.10% O45.00% O 84.80% O8.48% O None of the above b. What is the total overhead cost for an estimated activity level of 50,000 direct labor-hours?
c. How much Is the variable manufacturing cost per unit, using the varlable overhead estimated by the regression (assuming that direct materials and direct labor are variable costs)? O $88.00 O $82.00 O $86.80 O $72.00 O None of the above ook d. What is the expected contribution margin per unit to be earned during the first year on 20,000 units of the new product? (Assume that all marketing and administrative costs are fixed.) wint O $96.00 rences $24,00 O $56.00 O $14.00 O None of the above e. What is the manufacturing cost equation implied by these results? O Total cost $640,000 + (S$5.00 Number of units). OTotal cost $120,000 ($86.80 Number of units). OTotal cost-$120,000 ($72.00 Number of units). ONone of the above
Transcribed Image Text:c. How much Is the variable manufacturing cost per unit, using the varlable overhead estimated by the regression (assuming that direct materials and direct labor are variable costs)? O $88.00 O $82.00 O $86.80 O $72.00 O None of the above ook d. What is the expected contribution margin per unit to be earned during the first year on 20,000 units of the new product? (Assume that all marketing and administrative costs are fixed.) wint O $96.00 rences $24,00 O $56.00 O $14.00 O None of the above e. What is the manufacturing cost equation implied by these results? O Total cost $640,000 + (S$5.00 Number of units). OTotal cost $120,000 ($86.80 Number of units). OTotal cost-$120,000 ($72.00 Number of units). ONone of the above
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