Using Regression Results to Construct and Apply a Cost Formula Dohini 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 $18,860 370 February 18,065 330 March 19,250 370 April 18,050 410 May 19,345 400 June 19,500 450 July 19,670 460 August 20,940 560 September 19,430 440 October 20,020 500 November 18,800 470 December 19,340 480 The controller for Dohini Manufacturing ran regression on the data, and the coefficients shown by the regression program are: Intercept 15,021 (rounded to the nearest dollar) X variable 1 9.74 (rounded to the nearest cent) Required: 1. Construct the cost formula for the purchasing activity showing the fixed cost and the variable rate. Total purchasing cost = $fill in the blank 1 + ($fill in the blank 2 × Purchase orders) 2. If Dohini Manufacturing Company estimates that next month will have 430 purchase orders, what is the total estimated purchasing cost for that month? (Round your answer to the nearest dollar.) $fill in the blank 3 3. What if Dohini Manufacturing wants to estimate purchasing cost for the coming year and expects 5,340 purchase orders? What will estimated total purchasing cost be? (Round your answer to the nearest dollar.) $fill in the blank 4 What is the total fixed purchasing cost? $fill in the blank 5 Why doesn't it equal the fixed cost calculated in Requirement 1 above? because there are 12 months in the year

Using Regression Results to Construct and Apply a Cost Formula Dohini 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 $18,860 370 February 18,065 330 March 19,250 370 April 18,050 410 May 19,345 400 June 19,500 450 July 19,670 460 August 20,940 560 September 19,430 440 October 20,020 500 November 18,800 470 December 19,340 480 The controller for Dohini Manufacturing ran regression on the data, and the coefficients shown by the regression program are: Intercept 15,021 (rounded to the nearest dollar) X variable 1 9.74 (rounded to the nearest cent) Required: 1. Construct the cost formula for the purchasing activity showing the fixed cost and the variable rate. Total purchasing cost = $fill in the blank 1 + ($fill in the blank 2 × Purchase orders) 2. If Dohini Manufacturing Company estimates that next month will have 430 purchase orders, what is the total estimated purchasing cost for that month? (Round your answer to the nearest dollar.) $fill in the blank 3 3. What if Dohini Manufacturing wants to estimate purchasing cost for the coming year and expects 5,340 purchase orders? What will estimated total purchasing cost be? (Round your answer to the nearest dollar.) $fill in the blank 4 What is the total fixed purchasing cost? $fill in the blank 5 Why doesn't it equal the fixed cost calculated in Requirement 1 above? because there are 12 months in the year

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Using Regression Results to Construct and Apply a Cost Formula

Dohini 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	$18,860	370
February	18,065	330
March	19,250	370
April	18,050	410
May	19,345	400
June	19,500	450
July	19,670	460
August	20,940	560
September	19,430	440
October	20,020	500
November	18,800	470
December	19,340	480

The controller for Dohini Manufacturing ran regression on the data, and the coefficients shown by the regression program are:

Intercept	15,021 (rounded to the nearest dollar)
X variable 1	9.74 (rounded to the nearest cent)

Required:

1. Construct the cost formula for the purchasing activity showing the fixed cost and the variable rate.

Total purchasing cost

$fill in the blank 1

($fill in the blank 2 × Purchase orders)

2. If Dohini Manufacturing Company estimates that next month will have 430 purchase orders, what is the total estimated purchasing cost for that month? (Round your answer to the nearest dollar.)
$fill in the blank 3

3. What if Dohini Manufacturing wants to estimate purchasing cost for the coming year and expects 5,340 purchase orders? What will estimated total purchasing cost be? (Round your answer to the nearest dollar.)
$fill in the blank 4

What is the total fixed purchasing cost?
$fill in the blank 5

Why doesn't it equal the fixed cost calculated in Requirement 1 above?

because there are 12 months in the year

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