Nayvicky Company is making plans for the introduction of a new product, which has a target selling price of P5 per unit. The following estimates of manufacturing costs have been derived for 4 million units, to be produced during the first year: Direct material: P6,000,000 Direct labor: P2,000,000 (at P4 per hour) Overhead costs have not yet been estimated, but monthly data on total production and overhead for the past 12 months have been analyzed by using least-squares regression. The major overhead cost driver is direct labor hours, with the following results: Computed values: Fixed overhead cost: P200,000 Coefficient of independent variable: P10 REQUIRED: a. Prepare the company's regression equation (Y = a + bx) to estimate overhead. b. Calculate the projected gross profit at an activity level of 4,300,000 units. c. How can the company evaluate the "quality" of its regression equation?

Nayvicky Company is making plans for the introduction of a new product, which has a target selling price of P5 per unit. The following estimates of manufacturing costs have been derived for 4 million units, to be produced during the first year: Direct material: P6,000,000 Direct labor: P2,000,000 (at P4 per hour) Overhead costs have not yet been estimated, but monthly data on total production and overhead for the past 12 months have been analyzed by using least-squares regression. The major overhead cost driver is direct labor hours, with the following results: Computed values: Fixed overhead cost: P200,000 Coefficient of independent variable: P10 REQUIRED: a. Prepare the company's regression equation (Y = a + bx) to estimate overhead. b. Calculate the projected gross profit at an activity level of 4,300,000 units. c. How can the company evaluate the "quality" of its regression equation?

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Description: 7. Nayvicky Company is making plans for the introduction of a new product, which has a targetselling price of P5 per unit. The following estimates of manufacturing costs have been derivedfor 4 million units, to be produced during the first year:Dire

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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