Balcom enterprise is planning to introduce a new product that will sell for $110 per unit. Manufacturing cost estimates for 27,000 units for the first year of production are:

Direct materials $1.269,000

Direct labor $528,000 (based on $16 per hour * 33,000hours)

Although overhead has not be estimated for the new product, monthly data for Balcom's total production for the last two years have been analyzed using simple linear regression. The analysis results are as follows

Dependent variable Factory overhead costs

Independent variable Direct labor hours

Intercept $134,000

Co- efficient on independent variable $6.00

Coefficient of correlation 0.953

R square 0.842

Based on this information, what percentage of the variation in overhead costs is explained by the independent variable?

Mutiple Choice

a. 11%

b. 84.2%

c. 38%

d. 95.3%