The following information was taken from a computer printout generated with the least-squares method for use in estimating overhead costs: The cost formula is
A) Overhead = $5,700 - $45X
B) Overhead = $5,700 + $45X
C) Overhead = $5,700 + ($45 ´ 0.72)
D) Overhead = $5,700 ´ 0.72

Question

The following information was taken from a computer printout generated with the least-squares method for use in estimating overhead costs:  The cost formula is
A) Overhead = $5,700 - $45X 
B) Overhead = $5,700 + $45X 
C) Overhead = $5,700 + ($45 ´ 0.72) 
D) Overhead = $5,700 ´ 0.72

Quizplus · Accepted Answer

The cost formula is in the form of Y = a + bX, where Y is the total overhead cost, a is the fixed cost, b is the variable cost per unit of activity (X). From the given information, a = $5,700 and b = $45. Since the variable cost is added to the fixed cost, the correct formula is Overhead = $5,700 + $45X, which is option B.

The Following Information Was Taken from a Computer Printout Generated