Question

Chesley 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?

Total manufacturing overhead is represented by the variable "X."

The company anticipates $495,000 of fixed manufacturing overhead.

"X" is commonly known as the dependent variable.

"X" represents the number of machine hours.

The company anticipates $495,000 of fixed manufacturing overhead and "X" represents the number of machine hours.

Answer 1

The estimated fixed manufacturing overhead is $495,000, wich is the fixed element of the linear equation. The activity level is represented by X, which is the number of machine hours.

The correct statement is the last statement.

Step-by-step explanation:

Liner equation is Y = a + bx

Where Y represents the total overhead, which is the dependent variable

a represents the fixed cost, which is $495,000

b represents the variable element

x represents the activity level (machine hours)