Answer the Following Questions Using the Information Below

question 72

Multiple Choice

Answer the following questions using the information below:
Flify Manufacturing Inc., incurred total indirect manufacturing labor costs of $500,000. The company is labor intensive. Total labor hours during the period were 5,000. Using qualitative analysis, the manager and the management accountant determine that over the period the indirect manufacturing labor costs are mixed costs with only one cost driver-labor-hours. They separated the total indirect manufacturing labor costs into costs that are fixed ($110,000 based on 8,000 hours of labor) and costs that are variable ($390,000) based on the number of labor-hours used. The company has estimated 7,000 labor hours during the next period.
-Which of the following represents the correct linear cost function?

• A) y = $390,000 + $ 48.75X
• B) y = $110,000 + $100 X
• C) y = $110,000 + $78 X
• D) y = $390,000 + $62.50 X

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