Corrine Corporation, which uses least-squares regression analysis, has derived the following regression equation for estimates of manufacturing overhead: Y = 495,000 + 5.65X. Which of the following statements is true if the primary cost driver is machine hours?
A) Total manufacturing overhead is represented by the variable "X."
B) The company anticipates $495,000 of fixed manufacturing overhead.
C) "X" is commonly known as the dependent variable.
D) "X" represents the number of machine hours.
E) The company anticipates $495,000 of fixed manufacturing overhead and "X" represents the number of machine hours.

Question

Quizplus · Accepted Answer

In the given regression equation, Y = 495,000 + 5.65X, the constant term (495,000) represents the fixed manufacturing overhead, and the coefficient of X (5.65) represents the variable cost per unit of the cost driver, which in this case is machine hours. Therefore, "X" represents the number of machine hours, and the company anticipates $495,000 of fixed manufacturing overhead.

Corrine Corporation, Which Uses Least-Squares Regression Analysis, Has Derived the Following