Chapter $6-$ Problem $2$

WD Inc. is developing a regression cost equation for the indirect costs in its plant. WD manufactures windo

both products are made in standard and custom sizes. Occasionally, a very large order substantially increas

The indirect costs primarily consist of supplies, quality control and testing, overtime, and other indirect lab

primarily for cash management purposes. The management accountant, knows from prior years that both d

are good independent variables for estimating indirect costs.

Date

Jun$-18$ $$274,50026,9402,009$

July $320,00035,6903,057$

August $323,20032,5803,523$

September $219,90024,5801,856$

October $232,10019,9502,168$

November $342,30034,3303,056$

December $427,80043,1803,848$

Jan$-19231,00021,2901,999$

February $257,30028,4302,290$

March $248,70024,6601,894$

April $248,40027,8702,134$

May $338,40031,9403,145$

Question:

WD has received a custom order that would cause Direct Labor hours to be $45,000$ hours and Machine hou

Total Indirect

Costs

Direct Labor

Hours

Machine

Hours

They have budgeted a maximum cash flow of $$400,000$ for the month