The following information was taken from a computer printout generated with the least-squares method for use in estimating overhead costs: The cost formula is
A) Overhead = $5,700 - $45X
B) Overhead = $5,700 + $45X
C) Overhead = $5,700 + ($45 ´ 0.72)
D) Overhead = $5,700 ´ 0.72

Question

The following information was taken from a computer printout generated with the least-squares method for use in estimating overhead costs:  The cost formula is
A) Overhead = $5,700 - $45X 
B) Overhead = $5,700 + $45X 
C) Overhead = $5,700 + ($45 ´ 0.72) 
D) Overhead = $5,700 ´ 0.72

Quizplus · Accepted Answer

The cost formula is in the form of Y = a + bX, where Y is the overhead cost, X is the number of units produced, a is the fixed cost, and b is the variable cost per unit. From the given information, we know that the intercept (a) is $5,700 and the slope (b) is -$45 (since it is a cost, we know it is negative). 
Thus, the overhead cost formula is: 
Overhead = $5,700 + $45X

The Following Information Was Taken from a Computer Printout Generated