Question

Bradford Company derived the following cost relationship from a regression analysis of its monthly manufacturing overhead cost: C = $83,000 + $12M where: C = monthly manufacturing overhead cost, and M = machine hours The standard error of estimate of the regression is $7,500. The standard time required to manufacture one six-unit case of Bradford's single product is two machine hours. Bradford applies manufacturing overhead to production on the basis of machine hours, and its normal annual production is 53,000 cases. Bradford's estimated variable manufacturing overhead cost for a month in which scheduled production is 5,300 cases would be:

Answer 1

Bradford's estimated variable manufacturing overhead cost is $127,200

Step-by-step explanation:

The cost function=$83,000+$12M

where M stands for machine hours required to produce the expected output in the month under review.

Each one-six unit case of Bradford's single product requires two machine hours,hence 5,300 cases would require 10,600 hours(5,300*2hrs).

Total estimated variable manufacturing overhead=cost per machine hour*expected number of machine hours

cost per machine hour is $12 as seen in the cost function

estimated variable manufacturing overhead=$12*10,600=$127,200