Townson Company Is Making Plans for the Introduction of a New

question 59

Essay

Townson Company is making plans for the introduction of a new product, which has a target selling price of $7 per unit. The following estimates of manufacturing costs have been derived for 6 million units, to be produced during the first year:
Direct material: $6,000,000
Direct labor: $2,100,000 (at $14 per hour)
Overhead costs have not yet been estimated, but monthly data on total production and overhead for the past 12 months have been analyzed by using least-squares regression. The major overhead cost driver is direct labor hours, with the following results:
Computed values:
Fixed overhead cost: $3,200,000
Coefficient of independent variable: $2.25
Required:
A. Prepare the company's regression equation (Y = a + bX) to estimate overhead.
B. Calculate the predicted overhead cost at an activity level of 6,300,000 units.
C. What is Townson's dependent variable in this case?

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Definitions:

Discipline

Discipline involves the practice of training oneself or others to obey rules or a code of behavior, using punishment to correct disobedience or to cultivate a habit or skill.

Improve Communication

The process of enhancing the effectiveness and clarity of exchanging information between individuals or groups.

Be Understanding

The ability or effort to be empathetic and compassionate, making an attempt to see things from another's perspective.

Be Flexible

Indicates the capacity to adapt to changes and challenges effectively.