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.
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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
High-Low Method to Determine Fixed Cost and Variable Rate
Dohini Manufacturing Company had the following 12 months of data on purchasing cost and number of purchase orders.
Number of
Purchasing
Purchase
Month
January
February
March
April
May
June
July
August
September
October
November
December
Required:
Cost
$18,860
18.040
19,250
18,050
19,345
19,500
19,670
21.040
19,430
20,020
18,800
19,340
Orders
370
320
370
410
400
450
460
570
440
500
470
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
= $(?) + $( (?)x(?) )
Transcribed Image Text: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
5. If Dohini Manufacturing Company estimates that next month will have 420 purchase orders, what is the total estimated purchasing cost for that month?
6. What if Dohini 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?
Why doesn't it equal the fixed cost caloulated in Requirement 3 above?
Transcribed Image Text:High-Low Method to Determine Fixed Cost and.Variable Rate
Dohini Manufacturing Company had the following 12 months of data on purchasing cost and number of purchase orders.
Number of
Purchasing
Purchase
Month
Cost
Orders
January
$18,860
370
February
18,040
320
March
19,250
370
April
18,050
410
May
19,345
400
June
19,500
450
July
19,670
460
August
21,040
570
September
19,430
440
October
20,020
500
November
18,800
470
December
19,340
480
Required:
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