The cost accountants at the Barkley Company regressed total overhead costs and direct labor hours for the past 30-months and reported the following results:
$$\begin{array} { l r r }
\text { Slope } & \$ 41.27 \
\text { Intercept } & \$ 596.36 \
\text { Correlation Coefficient } & 0.934
\end{array}$$
What is the estimated overhead cost if 225 direct labor hours are expected to be used in the upcoming period? (rounded to the nearest whole dollar)
A) $10,534.
B) $9,882.
C) $9,230.
D) $8,617.

Question

The cost accountants at the Barkley Company regressed total overhead costs and direct labor hours for the past 30-months and reported the following results:
$$\begin{array} { l r r } 
\text { Slope } & \$ 41.27 \
\text { Intercept } & \$ 596.36 \
\text { Correlation Coefficient } & 0.934
\end{array}$$
What is the estimated overhead cost if 225 direct labor hours are expected to be used in the upcoming period? (rounded to the nearest whole dollar)
A) $10,534.
B) $9,882.
C) $9,230.
D) $8,617.

Quizplus · Accepted Answer

The estimated overhead cost is calculated using the regression equation: Overhead Cost = Intercept + (Slope * Direct Labor Hours). Plugging in the values: $596.36 + ($41.27 * 225) = $9,882.61, which rounds to $9,882.