Balcom Enterprises Is Planning to Introduce a New Product That

question 11

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, 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) ?

• A) $78
• B) $91
• C) $96
• D) $71

Understand the rules for revenue recognition in governmental accounting.

Comprehend the classification and reporting of fund balances in governmental funds.

Recognize the different fiduciary funds and their usage in governmental accounting.

Understand the implications of specific decisions (e.g., city council decisions) on fund balance designations.

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Definitions:

Income Distribution

The way in which total income is shared among individuals or groups in an economy.

Production Incentives

Motivational factors or rewards designed to encourage increased productivity or output by workers or companies.

Marginal Productivity Theory

An economic theory that explains income distribution based on the productivity of the factor inputs in producing goods and services.

Income Distribution

The way in which a nation’s total income is spread among its population, affecting economic inequality.