The controller of the Beresford plant of Gamerco, Inc., monitored activities associated with purchasing and receiving raw materials. The high and low levels of resource usage occurred in October and March for three different resources associated with purchasing and receiving. The number of purchase orders is the driver. The total costs of the three resources and the activity output, as measured by purchase orders, for the two different levels are presented as follows:

Required:
1. Determine the cost behavior formula of each resource. Use the high-low method to assess the fixed and variable components.
2. Using your knowledge of cost behavior, predict the cost of each item for an activity output level of 25,000 purchase orders.
3. Construct a cost formula that can be used to predict the total cost of the three resources combined. Using this formula, predict the total purchasing and receiving cost if activity output is 22,000 purchase orders. In general, when can cost formulas be combined to form a single cost formula?

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Resource Supplier verification: Low High Receiving: Purchase Orders Total Cost 12,000 $ 43,000 30,000 43,000 Low 12,000 $ 81,600 High 30,000 204,000 Processing purchase orders: Low 12,000 $ 43,200 High 30,000 97,200