Refer to the information from problem 5-32.

Required: Using the scatter graph method, determine the following:

a. The variable cost per purchase order.

b. The fixed cost of operating the purchasing department for one quarter.

c. The estimated cost of operating the purchasing department in 2005 assuming that 7,000 purchase orders will be issued.

Problem 5-32

The following information pertains to Picon Manufacturing for 2003 and 2004:

Required: Using the high-low method, determine the following:

a. The variable cost per purchase order.

b. The fixed cost of operating the purchasing department for one quarter.

c. The estimated cost of operating the purchasing department in 2005 assuming that 7,000 purchase orders will be issued.

Transcribed Image Text:

Fourth quarter of 2003 First quarter of 2004 Second quarter of 2004 Number of Purchase Orders Issued 2,500 Cost of Operating the Purchasing Department $130,000 1,000 80,000 1,500 110,000 Third quarter of 2004 2,000 115,000 Fourth quarter of 2004 3,000 140,000