# Question: wallys cross country adventures is recently preparing for its third...

###### Question details

Wallys Cross Country Adventures is recently preparing for its
third year in business. Wally's was formed by Wally Glider in
response to his frustration of affordable high quality skis for his
Nordic skiing activities. Wally's was founded on the principles of
developing durable high performing cross country skis for serious
Nordic Skiers in the Rocky Mountain States. Wally has continually
modified his production techniques and materials and has become a
major niche competitor in the competition cross country ski market.
Recently, Wally has decided he needs to develop a better
understanding of his costs so that he can better plan and control
his operations. Therefor, he has begun to more closely analyze his
production and selling and distribution costs. Construction of
competition cross country skis is a labor intensive operation and
Wally has decided that he would use a regression model using labor
hours to help him better understand his fixed and variable
manufacturing overhead costs. **Information resulting from a
regression analysis using mostly data collected over the past 18
months with manufacturing overhead cots as the dependent variable
and direct labor hours as the independent variable provided
below:**

Intercept: 15460

Coefficient of the independent variable: 38.40

Standard error of the coefficient of the independent variable: 10.25

Coeffincient of correlation (r): 0.847

Coefficient of determination (r squared): 0.717

**Direct costs associated with making the 3,000 pairs of
cross country skis that Wally plans to produce during 2019 are as
follows:**

Direct Materials: $330,000 (all variable)

Direct Labor: $75,000 (the labor rate is $30/hour and direct labor is all variable)

**Additional costs and revenue information is as
follows:**

The cross country skis are packages, shipped and sold for $350/pair. Wally has worked out a deal with a major shipping company to ship his skis anywhere in the continental United States for $26/pair. Wally has also estimated that all of his selling and administrative costs other than shipping is fixed and he estimated that is will be $200,000 for the year of 2019.

**Questions Required:**

**1.)** Determine the t-value for the regression
model? What does this imply about the model?

2.) What is the r squared for the regression model? What does this imply about the model?

**Regardless of your findings in parts 1 and 2 use the
regression results along with all other relevant information in
answering questions 3-6.**

3.) What is the total estimated manufacturing overhead cost for a month when 210 direct labor hours are budgeted for production?

4.) what is the total estimated fixed costs per year for Wally's Cross Country Adventures?

5.) Determine the expected contribution margin for one pair of cross country skis.

6.) Determine the annual breakeven point in pairs of skis for Wally's cross country adventures assuming that all costs and the selling price are as budgeted.