Answer (B) is correct . The total overhead may be estimated using the regression equation as y = a + bx . Total overhead = $40,000 + [($2.10)*(20,000)] = $82,000 Note that the fixed costs are $40,000 and the variable costs are $2.10 per direct labor hour.
Answer (A) is incorrect because The amount of $42,000 represents only variable costs. Answer (C) is incorrect because It overstates the variable cost portion of the total.
Answer (D) is incorrect because It overstates the variable cost portion of the total.
