Jerry Thomas is the manger for the storeroom for Classic Manufacturing. He was asked to estimate the future monthly purchase costs for part number 782. Jerry collected the cost and quantity data for the past nine months as provided below. Month Purchase cost Quantity Purchased January $ 12,925 2,762 February $ 13,250 2,862 March $ 17,903 4,212 April $ 16,075 3,818 May $ 13,375 2,966 June $ 14,064 3,447 July $ 15,550 3,685 August $ 10,483 2,356 September $ 15,200 3,636 Estimated monthly purchases of part 782 for the following three months are: October 3,590 November 3,960 December 3,290 Required: (a) Use the high-low method to develop a linear formula to estimate the purchase costs for the parts to be purchased for the rest of the year (b) Use the formula in (a) to estimate the purchase costs for each of the months October to December. (c) Use the regression method to develop a formula to estimate the purchase costs for the parts to be purchased for the rest of the year. (d) Use the formula in (c) to estimate the purchase costs for each of the months October to December. (e) What are your comments on the results in (b) and (d) above? Show all your calculations for (a) to (d).
Jerry Thomas is the manger for the storeroom for Classic Manufacturing. He was asked to estimate the future monthly purchase costs for part number 782. Jerry collected the cost and quantity data for the past nine months as provided below.
| Month | Purchase cost | Quantity Purchased |
| January | $ 12,925 | 2,762 |
| February | $ 13,250 | 2,862 |
| March | $ 17,903 | 4,212 |
| April | $ 16,075 | 3,818 |
| May | $ 13,375 | 2,966 |
| June | $ 14,064 | 3,447 |
| July | $ 15,550 | 3,685 |
| August | $ 10,483 | 2,356 |
| September | $ 15,200 | 3,636 |
Estimated monthly purchases of part 782 for the following three months are:
October 3,590
November 3,960
December 3,290
Required:
(a) Use the high-low method to develop a linear formula to estimate the purchase costs for the parts to be purchased for the rest of the year
(b) Use the formula in (a) to estimate the purchase costs for each of the months October to December.
(c) Use the regression method to develop a formula to estimate the purchase costs for the parts to be purchased for the rest of the year.
(d) Use the formula in (c) to estimate the purchase costs for each of the months October to December.
(e) What are your comments on the results in (b) and (d) above?
Show all your calculations for (a) to (d).
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