Norde Company Is Making Plans for the Introduction of a New

question 92

Essay

Norde 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 Norde's dependent variable in this case?

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Definitions:

Agriculture

The practice of cultivating the soil, growing crops, and raising livestock for food, fiber, fuel, and other products essential to human life and economic activity.

Mexico

A country located in the southern portion of North America, known for its rich cultural heritage, history, and as a popular tourist destination.

Andes

A major mountain range in South America, extending over seven countries and home to diverse cultures and historical civilizations.

Western Coast of Africa

The coastline along the Atlantic Ocean in West Africa, extending from Senegal to Angola, known for its rich history, including the transatlantic slave trade.