An Organisation's Accountant Is Estimating Next Period's Total Overhead Costs

Multiple Choice

An organisation's accountant is estimating next period's total overhead costs. She performed two regression analyses, one based on direct labour hours and the other based upon machine hours. The results were: Total overhead = $150,000 + $4 x direct labour hours
Adjusted R-square = 0.83
Total overhead = $130,000 + $5 x machine hours
Adjusted R-square = 0.77
For the next period the accountant anticipates using 28,000 direct labour hours and 26,000 machine hours. Based upon this information, what is the best estimate for overhead for the next period?

A) $262,000
B) $260,000
C) $254,000
D) $270,000