Cortez Company is planning to introduce a new product that will sell for $96 a unit . The follow - ing manufacturing cost estimates have been made on 20, 000 units to be produced the first year ." Direct materials ...... $800, 000 Direct labor ...... 640, 000 ( = $16 per hour x 40, 000 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 the simple regression and provide the basis for overhead cost estimates for the new product . Simple Regression Analysis Results Dependent variable -_ Factory overhead costs COLUISORTIZ` Independent variable - Direct labor - hours Computed values Intercept ...... $ 120. 000 Coefficient on independent variable .. 5.00 Coefficient of correlation . ..... . " 0. 921 0. 848