Solution-How much would be saved in overhead cost

How much would be saved in overhead cost

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Reference no: EM132825171

Question - Velman Company wants to determine the factors that are associated with overhead. The controller for Velman constructed a multiple regression equation using the following indeoendent variables: direct labor hours, number of setups, and number of purchase orders. The analysis was run using the past 50 months of data. From the printout, the following data were obtained:

Parameter Estimate

Intercept P5,000

Rates of variability

Direct labor hours (H) P10

Number of setups (S) P900

Number of purchase orders (P) P20

Number of observations (n) 50

r² = 0.95

REQUIRED -

1. Write out the cost formula for monthly overhead for Velman Company.

2. If Velman budgets the following for next month, what is the budgeted overhead cost?

Direct labor hours 400

Number of setups 30

Number of purchase orders 150

3. Suppose that Velman's engineers found a way to reduce the number of setups by 40 percent. How much would be saved in overhead cost for the following month?

Reference no: EM132825171

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How much would be saved in overhead cost

Reference no: EM132825171

Reference no: EM132825171

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