The Clean Manufacturing Company reported the following information in November:

Indirect manufacturing labor hours = $3,750 + ($15 per machine hour × 925 machine hours).
Required:
Use the account analysis method and choose the linear cost equation to represent this data.

Question

The Clean Manufacturing Company reported the following information in November:

Indirect manufacturing labor hours = $3,750 + ($15 per machine hour × 925 machine hours).
Required:
Use the account analysis method and choose the linear cost equation to represent this data.

Quizplus · Accepted Answer

The linear cost equation is in the form of y = a + bX. In this case, the indirect manufacturing labor expenses (y) depend on the number of machine hours (X). Therefore, the correct equation is: 
Indirect manufacturing labor hours = a + b(machine hours) 
Where a is the fixed cost and b is the variable cost per unit. Therefore, the equation should be written as: 
y = a + bX 
Or, 
Indirect manufacturing labor hours = a + b × machine hours. 
This is equivalent to answer choice D.

The Clean Manufacturing Company Reported the Following Information in November