Exhibit 5-3
Hayley Inc -Refer to Exhibit 5-3

Multiple Choice

Exhibit 5-3
Hayley Inc.is using the account analysis approach to identify the cost behavior of production costs for one month.The production manager was asked to review these costs and provide her best guess as to how they should be categorized.Hayley produced 200 units for the month.She responded with the following information.
$\begin{array}{lrrr}&\text { Total } &=\text { Variable } &+\text { Fixed }\\ \text { Direct materials used in production } & \$ 370,000 & \$ 370,000 & \$-0- \\\text { Direct labor used in production } & 230,000 & 230,000 & -0- \\\text { Overhead costs } & \underline{220,000} & \underline{200,000} & \underline{20,000} \\\text { Total production costs } & \underline{\$ 20,000} & \underline{\$ 800,000} & \underline{\$ 20,000}\end{array}$

-Refer to Exhibit 5-3.Assume Hayley intends to produce 180 units next month.Using the account analysis approach,which of the following is the correct estimate of the total production costs for the month?

A) $740,000
B) $720,000
C) $738,000
D) $820,000
E) None of the answer choices is correct.