Balcom Enterprises Is Planning to Introduce a New Product That

question 14

Multiple Choice

Balcom Enterprises is planning to introduce a new product that will sell for $110 per unit. Manufacturing cost estimates for 20,000 units for the first year of production are:
? Direct materials $1,000,000.
? Direct labor $720,000 (based on $18 per hour × 40,000 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:
$\begin{array}{lrr}\text {Dependent variable}&\text {Factory overhead costs}\\\text {Independent variable}&\text {Direct labor hours}\\\text { Intercept } & \$ 120,000 \\\text { Coefficient on independent variable } & \$ 5.00 \\\text { Coefficient of correlation } & 0.911 \\\text { R }^2 & 0.814\end{array}$

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Based on this information, what percentage of the variation in overhead costs is explained by the independent variable?

• A) 24%
• B) 81.4%
• C) 91.1 %
• D) 9.7%

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Impatience

A disposition toward being quickly irritated or provoked by delays or obstacles.

Perfectionism

A personality trait characterized by striving for flawlessness and setting excessively high performance standards, accompanied by overly critical self-evaluations.

Illusory Promise

A statement that appears to be a promise but does not actually bind the party to any commitment or obligation.

Promissory Estoppel

A legal principle that prevents a party from going back on a promise, even if the promise was not formally agreed upon, if the other party has relied on that promise to their detriment.