d) How much is the variable manufacturing cost per unit, using the variable over
ID: 2540288 • Letter: D
Question
d) How much is the variable manufacturing cost per unit, using the variable overhead estimated by the regression (assuming the direct materials and direct labour are variable cost)?
A. $1.80
B. $2.22
C. $2.44
D. $3.50
E. $6.40
Woodstock Company is planning to introduce a new product that will sell for $12 a unit. The following manufacturing cost estimates have been made on 100,00 units to be produced the first year Direct materials Direct labour costs $100,000 $80,000 (the wage rate is $8 an hour x 10,000 labour hours) Manufacturing overhead costs have not yet been estimated for new product, but monthly data on total production and overhead costs for the past 24 months have been analysed 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 Computer values Intercept Coefficient of independent variable Coefficient of correlation Coefficient of determination $120,000 $6.40 0.958 0.918Explanation / Answer
1. Answer is option E 6.40
Variable Manufacturing cost per unit = coefficient of independent variable
2. Option C TC = 120000+6.40X
Fixed cost = intercept (120000)
Variable cost= coefficient of independent variable (6.40)
3. Answer is option B $10.00
Total cost = 840000+210000= 1050000
Equivalent units = 100000+(20000*25%)= 105000
Equivalent unit cost = 1050000/105000= 10
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.