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Chapter 6- Problem 2 WD Inc. is developing a regression cost equation for the...

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Accounting

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

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