Quarterly, and Yearly Costs Using a Cost Formula Based on Monthly Data
Gordon Company’s controller, Eric Junior, estimated the following formula, based on monthly data, for overhead cost:
Overhead cost = $150,000 + ($52 x Direct labor hours)

Required:
1. Link each term in column A to the corresponding term in column B.
Column A Column B
Overhead cost ........ Fixed cost (intercept)
$150,000 .......... Dependent variable
$52 ............ Independent variable
Direct labor hours Variable rate (slope)
2. If next month’s budgeted direct labor hours equal 8,000, what is the budgeted overhead cost?
3. If next quarter’s budgeted direct labor hours equal 23,000, what is the budgeted overhead cost?
4. If next year’s budgeted direct labor hours equal 99,000, what is the budgeted overhead cost?