Alpha Company produces several different products and is making plans for the introduction of a new product, which it will sell for $6 a unit. Thefollowingestimates have been made for manufacturing costs on 100,000 units to be produced the first year:Direct materials

$500,000

Direct labor

$40,000 (the labor rate is $4/hour)

Overhead costs have not been established for the new product, but monthly data on total production and overhead cost for the past 24 months have been analyzed using simple linear regression. The resultsbelowwere derived from the simple regression and provide the basis for overhead cost estimates for the new product.Dependent variable (y) -- Manufacturing overhead costs

Independent variable (x) -- Direct labor hours

Computed values:

y-intercept

$40,000

Coefficient of independent variable

$2.10

Coefficient of correlation

0.953

Standard error of estimate

$2,840

Standard error of regression coefficient

0.42

Mean value of independent variable

$18,000

Coefficient of determination

0.908

Question

What percentage of the variation in Alpha's overhead costs is explained by the independent variable?

a. 95.3%

b. 42%

c. 48.8%

d. 90.8%