Final answer:
In the cost formula Y = a + bX, 'b' signifies the estimated variable manufacturing overhead cost per unit. Total costs comprise fixed costs plus variable costs, and spreading overhead refers to distributing fixed costs over more units as production increases.
Step-by-step explanation:
In the formula Y = a + bX, b represents the estimated variable manufacturing overhead cost per unit. This formula is typically used to model the cost behavior of a company where Y represents the total cost, a represents the total fixed overhead cost, which does not change with the level of output, and X represents the level of activity or production volume.
When businesses calculate total costs, these are the sum of fixed costs plus variable costs. For instance, let's consider The Clip Joint, a barber shop example. Its fixed costs, which include rent and equipment, are constant at $160 per day. On the other hand, variable costs change with the level of output and in this example, relate to the wages paid to barbers, which are $80 per barber each day.