Mulvey Company Derived the Following Cost Relationship from a Regression

question 72

Multiple Choice

Mulvey Company derived the following cost relationship from a regression analysis of its monthly manufacturing overhead cost: C = $80,000 + $12M where: C = monthly manufacturing overhead cost and M = machine hours.The standard error of estimate of the regression is $6,000.The standard time required to manufacture one six-unit case of Mulvey's single product is four machine hours.Mulvey applies manufacturing overhead to production on the basis of machine hours,and its normal annual production is 50,000 cases.Mulvey's estimated variable manufacturing overhead cost for a month in which scheduled production is 5,000 cases would be:

• A)$80,000.
• B)$320,000.
• C)$240,000.
• D)$360,000.
• E)Some amount other than those given above.

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Definitions:

Marginal Cost Curve

A graphical representation showing how the cost of producing one additional unit of a good changes as production volume changes.

Short-run Supply

The total quantity of goods or services that producers are willing and able to sell at a given price in a short period.

Economic Profit

Economic profit is the profit from producing goods and services while factoring in the full costs of its resources, including opportunity costs.

Average Total Cost

The total cost divided by the quantity produced, reflecting the per unit cost of production.