Question

Luke Ltd has scheduled a production of 200,000 feet of premium cedar lumber for June. The accountant provided the following analysis of total manufacturing costs for lumber based on Direct Labor Hours.

             Variable                                 Coefficient  Standard Error    t-Value

            Constant                                    50,000               101.20               0.89
            Independent variable (DLHr)         0.20                   9.50               4.18

             r2 = 0.78

What is the estimated cost of producing the 200,000 feet of lumber?

Question 5 options:

	a) $836,101.20
	b) $90,000
	c) None of these answers is correct.
	d) $50,000.20

Answer 1

Fixed cost	50000
Variable cost per DLHr	0.20
Estimated cost of producing 200,000 feet of lumber	90000	=50000+(200000*0.2)
Option B $90,000 is correct