Frost-Byte Part 3 Frost-Byte is planning to introduce a new product that will sell for $12 a unit. A total of 100,000 units will be produced during the first year. Direct materials are projected to be $100,000 and labour costs amount to $80,000. The wage rate is $8 per hour and 10,000 labour hours are projected. Manufacturing overhead costs have not 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 simple regression and provided the basis for overhead cost estimates for the new product. The coefficient of independent variable represents the variable overhead rate. The cost driver for variable overhead is direct labour hours. Simple Regression Analysis Results Dependent variable: Factory overhead costs Independent variable: Direct labour hours Computed values are as follows: Intercept Coefficient of independent variable Coefficient of correlation Coefficient of determination $120,000 $6.40 0.958 0.918 What is the expected unit contribution margin to be earned during the first year on 100,000 units of the new product? (Assume that all marketing and admin costs are fixed)
Frost-Byte Part 3 Frost-Byte is planning to introduce a new product that will sell for $12 a unit. A total of 100,000 units will be produced during the first year. Direct materials are projected to be $100,000 and labour costs amount to $80,000. The wage rate is $8 per hour and 10,000 labour hours are projected. Manufacturing overhead costs have not 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 simple regression and provided the basis for overhead cost estimates for the new product. The coefficient of independent variable represents the variable overhead rate. The cost driver for variable overhead is direct labour hours. Simple Regression Analysis Results Dependent variable: Factory overhead costs Independent variable: Direct labour hours Computed values are as follows: Intercept Coefficient of independent variable Coefficient of correlation Coefficient of determination $120,000 $6.40 0.958 0.918 What is the expected unit contribution margin to be earned during the first year on 100,000 units of the new product? (Assume that all marketing and admin costs are fixed)
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Transcribed Image Text:What is the expected unit contribution margin to be earned during the first year on 100,000 units of the new product? (Assume that all marketing and
admin costs are fixed)
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$8.18
$9.56
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$6.40
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Transcribed Image Text:Frost-Byte Part 3
Frost-Byte is planning to introduce a new product that will sell for $12 a unit. A total of 100,000 units will be produced during the first year. Direct
materials are projected to be $100,000 and labour costs amount to $80,000. The wage rate is $8 per hour and 10,000 labour hours are projected.
Manufacturing overhead costs have not 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 simple regression and provided the basis for
overhead cost estimates for the new product. The coefficient of independent variable represents the variable overhead rate. The cost driver for variable
overhead is direct labour hours.
Simple Regression Analysis Results
Dependent variable: Factory overhead costs
Independent variable: Direct labour hours
Computed values are as follows:
Intercept
Coefficient of independent variable
Coefficient of correlation
Coefficient of determination
$120,000
$6.40
0.958
0.918
What is the expected unit contribution margin to be earned during the first year on 100,000 units of the new product? (Assume that all marketing and
admin costs are fixed)
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