Gordon Company’s controller, Eric Junior, estimated the following formula, based on monthly data, for overhead cost:
Overhead cost = $109,743 + ($80.75 × Direct labor hours)
Required:
1. Link each term in column A to the corresponding term in column B.
Column A Column B
Overhead cost .....Variable rate (slope)
$109,743 ........Independent variable
$80.75 .........Fixed cost (intercept)
Direct labor hours ...Dependent variable
2. If next month’s budgeted direct labor hours equal 5,000, what is the budgeted overhead cost?
3. If next quarter’s budgeted direct labor hours equal 18,000, what is the budgeted overhead cost?
4. If next year’s budgeted machine hours equal 58,000, what is the budgeted overhead cost?