An Organization's Accountant Is Estimating Next Period's Total Overhead Costs

question 16

Multiple Choice

An organization's accountant is estimating next period's total overhead costs. She performed two regression analyses, one based on direct labour hours and the other based upon machine hours. The results were:
Total overhead = $150,000 + $4 x direct labour hours
Adjusted R-square = 0.65
Total overhead = $130,000 + $5 x machine hours
Adjusted R-square = 0.77
For the next period, the accountant anticipates using 28,000 direct labour hours and 26,000 machine hours. Based upon this information, what is the best estimate for overhead for the next period?

• A) $262,000
• B) $260,000
• C) $254,000
• D) $270,000

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Definitions:

Exchange Theory

A sociological and psychological theory that analyzes social interactions as transactions where individuals seek to maximize rewards while minimizing costs.

Dramaturgical Analysis

Dramaturgical analysis is a perspective in sociology that interprets social interactions as if they were part of a theatrical performance, where individuals manage impressions in front of others.

Rational Choice Theory

A framework in social sciences that explains individual behavior as the outcome of rational decisions made by individuals aiming to maximize their benefits and minimize their costs.

Exchange Theory

A social psychological and sociological perspective that explains social change and stability as a process of negotiated exchanges between parties.