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Manufacturing company developed the following multiple regression equation, utilizing many years of data,

and uses it to model, or estimate, the cost of its product. 

Cost = FC + (a × L) + (b × M) 

Where: FC = fixed costs 

L = labor rate per hour 

M = material cost per pound 

please explain your answer

Which one of the following changes would have the greatest impact on invalidating the results of this model?  

 

A. A significant reduction in factory overheads, which are a component of fixed costs. 

B. Renegotiation of the union contract calling for much higher wage rates. 

C. A large drop in material costs, as a result of purchasing the material from a foreign source. 

D. A significant change in labor productivity.

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Question added by هيثم ناجى , محاسب اول , الفيوم لصناعة السكر
Date Posted: 2016/02/17
تحسين صوان
by تحسين صوان , محاسب رئيسي , ش العربيه لصناعه المواسير (شركه مساهمه عامه )

 Choose the answer d: a significant change in labor productivity. Because the volume of production has to do with the great cost in terms of the greater volume of production unit said the percentage of the one of your cost Fixed

Muhammad Faizan
by Muhammad Faizan , Junior Assistant (Admin) , govt.dept

C. A large drop in material costs, as a result of purchasing the material from a foreign source.

D. A significant change in labor productivity.

because the fixed costs id fixed within the relevant range of output

 

if the productivity changed in a significant way the output level will change and the fixed cost will change.

 

also the change in productivity will cause the DL cost per unit to change 

 

Mohammad Iqbal Abubaker
by Mohammad Iqbal Abubaker , Jahaca Pty Ltd - Accounts Administrator , Jahaca Pty Ltd - Accounts Administrator

D. A significant change in labor productivity.