McGarvey Manufacturing Company had the following 12 months of data on purchasing cost and number of purchase orders. Month Purchasing Cost Number of Purchase Orders January $19,250 370 February 18,060 330 March 18,200 340 April 18,050 410 May 19,345 400 June 19,500 450 July 19,670 460 August 21,300 600 September 19,430 440 October 20,020 570 November 18,800 470 December 19,340 480 Required: 1. Determine the high point and the low point. Month with high number of purchase orders ___ Month with low number of purchase orders _ 2. Calculate the variable rate for purchasing cost based on the number of purchase orders. (Round to the nearest cent.) $_ per purchase order 3. Calculate the fixed monthly cost of purchasing. $_ 4. Write the cost formula for the purchasing activity showing the fixed cost and the variable rate. Round variable rate to the nearest cent. Total purchasing cost = $ + ($xPurchase orders) 5. If McGarvey Manufacturing Company estimates that next month will have 420 purchase orders, what is the total estimated purchasing cost for that month? $___ 6. What if McGarvey Manufacturing wants to estimate purchasing cost for the coming year and expects 5,330 purchase orders? What will estimated total purchasing cost be? $_ What is the total fixed purchasing cost? $_____

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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McGarvey Manufacturing Company had the following 12 months of data on purchasing cost and number of purchase orders.

Month	Purchasing Cost	Number of Purchase Orders
January	$19,250	370
February	18,060	330
March	18,200	340
April	18,050	410
May	19,345	400
June	19,500	450
July	19,670	460
August	21,300	600
September	19,430	440
October	20,020	570
November	18,800	470
December	19,340	480

Required:

1. Determine the high point and the low point.

Month with high number of purchase orders	_______
Month with low number of purchase orders	_______

2. Calculate the variable rate for purchasing cost based on the number of purchase orders. (Round to the nearest cent.)
$_____ per purchase order

3. Calculate the fixed monthly cost of purchasing.
$_____

4. Write the cost formula for the purchasing activity showing the fixed cost and the variable rate. Round variable rate to the nearest cent.

Total purchasing cost

$______

($______xPurchase orders)

5. If McGarvey Manufacturing Company estimates that next month will have 420 purchase orders, what is the total estimated purchasing cost for that month?

$_______

6. What if McGarvey Manufacturing wants to estimate purchasing cost for the coming year and expects 5,330 purchase orders? What will estimated total purchasing cost be?
$_____

What is the total fixed purchasing cost?
$_______

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