Balcom Enterprises is planning to introduce a new product that will sell for $120 a unit. Manufacturing cost estimates for 28,000 units for the first year of production are: Direct materials $1,372,000.Direct labor $1,008,000 (based on $18 per hour × 56,000 hours).Although overhead has not be estimated for the new product, monthly data for Balcom's total production for the last two years has been analyzed using simple linear regression. The analysis results are as follows: Dependent variableFactory overhead costsIndependent variableDirect labor hoursIntercept$136,000 Coefficient on independent variable$5.00 Coefficient of correlation 0.959 R2 0.846 Based on this information, 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)? Multiple Choice $72 $92 $95 $77

The objective of the question is to calculate the variable manufacturing cost per unit for Balcom…

Answered: Balcom Enterprises is planning to…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter3: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 5EA: Maple Enterprises sells a single product with a selling price of $75 and variable costs per unit of...

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Balcom Enterprises is planning to introduce a new product that will sell for $120 a unit. Manufacturing cost estimates for 28,000 units for the first year of production are:

Direct materials $1,372,000.
Direct labor $1,008,000 (based on $18 per hour × 56,000 hours).

Although overhead has not be estimated for the new product, monthly data for Balcom's total production for the last two years has been analyzed using simple linear regression. The analysis results are as follows:


Dependent variable	Factory overhead costs
Independent variable	Direct labor hours
Intercept	$	136,000
Coefficient on independent variable	$	5.00
Coefficient of correlation		0.959
R²		0.846

Based on this information, 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)?

Multiple Choice