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Use the following to answer Questions 7-11 Woodstock Company is planning to introduce a new product that will sell for $12 a unit. The following manufacturing cost estimates have been made on 100,000 units to be produced the first year. Direct materials Direct labour costs $100,000 $ 80,000 (the wage rate is S8 an hour x 10,000 labour hours) Manufacturing overhead costs have not yet been estimated for the new product, but monthly data on total production and overhead costs for the past 24 months have been analyzed using simple linear regression. The following overhead cost estimates for the new product. The coefficient of independent variable represents the variable overhead rate. The cost driver for variable overhead is direct labour hours. results were derived from simple regression and provided the basis for Simple Regression Analysis Results Dependant variable-Factory overhead costs Independent variable- Direct labour hours Computed values Intercept Coefficient of independent variable Coefficient of correlation Coefficient of determination $120,000 $6.40 0.958 0.918 7. What percentage of the variation in overthead costs is explained by the independent variable? A. 90.8% B. 97.9% C. 95.8% D. 91.8% E. 84.3% 8. The total overhead cost for an estimated activity level of 20,000 direct labour-hours is A. $110,000 B. $120,000 C. $164,000 D. $238,000 E. $248,000 9. What is the expected unit contribution margin to be earned during the first year on 100,000 units of the new product? (Assume that all marketing and administrative costs are fixed). A. $9.56 B. $9.78 C. $8.18 D. $6.40 E. $10.30

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