20 21 22 Use the following to answer questions 19 23 EXERCISE Pentag Company is planning to introduce a new product that will sell for $12 a unit. The following manufacturing cost estimates have been made on 100,000 units to be produced the first year Direct materials $100,000 Direct labour costs 80,000 the wage rate is $8 an hour x 10,000 labour hours) Manufacturing overhead costs have not yet been estimated for the new product, but monthly data on total production and overhead costs for the past 24 months have been analyzed using simple linear regression. The following results were derived from simple regression and provided the basis for overhead cost estimates for the new product. The coefficient of independent variable represents the variable overhead rate. The cost driver for variable overhead is direct labour hours. Simple Regression Analysis Results Dependant variable Factory overhead costs Independent variable Direct labour hours Computed values $110,000 Interce Coefficient of independent variable..... 6.40 Coefficient of correlation 0.953 0.908 l9, what percentage of the variation in overhead costs is explained by the independent variable? a) 90.8 b) 42. c) 48.8 d) 95.3 e) some other amount Co. The total overhead cost for an estimated activity level of 20,000 direct labour-hours is a) S110,000 b) S128,000 c) $164,000 d) $238,000 e) Some other amount 2 l, What is the expected contribution margin per unit to be earned during the first year on 00,000 units of the new product? (Assume that all marketing and administrative costs are fixed.) a) $9.56 b) $9.78 c) $8.18 d) $10.20 e) Some other amount 22. How much is the variable manufacturing cost per unit, using the variable overhead estimated by the regression (assuming that direct materials and direct labour are variable costs)? a) $1.80 b) $2.22 c) $2.44 d) $6.00 e) Some other amount