A single-product company uses regression to predict one of its factory overhead costs with materials used as the independent variable. The regression ... Accounting MCQs | Accounting MCQs

A single-product company uses regression to predict one of its factory overhead costs with materials used as the independent variable. The regression equation is as follows: Y = 542,000 + 0.0000253X. Based on R², management has determined that this model captures a significant portion of the relationship. The behavior of this company’s factory overhead cost with respect to units of finished goods produced is

Fixed.SemivariableVariable. Not determinable from the provided information.Show Result

Correct - Your answer is correct.

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Detailed Answer

Answer (A) is correct. The behavior of the factory overhead cost with respect to units of finished goods produced for this company represents a fixed cost pattern. Fixed costs in total remain unchanged in the short run regardless of production level. The Y-axis intercept, or $542,000 in this case, represents the fixed portion. This number is not affected by the number of finished goods produced in the short run. For example, if 1 unit is number). If 10,000 units are produced, the cost would still equal $542,000 (rounded to the nearest whole number).