Caiman Distribution Partners is the Brazilian distribution company of a U.S. consumer products firm. Inflation in Brazil has made bidding and budgeting difficult for marketing managers trying to penetrate some of the country's rural regions. The company expects to distribute 450,000 cases of products in Brazil next month. The controller has classified operating costs (excluding costs of the distributed product) as follows. Account Supplies Supervision Truck expense Building leases Utilities Warehouse labor Equipment leases Data processing equipment Other Total Operating cost $1,596,000 235,000 1,310,000 866,000 234,000 855,000 770,000 956,000 861,000 $ 7,683,000 Behavior All variable $145,000 Fixed $ 172,000 Fixed $552,000 Fixed $112,000 Fixed $121,000 Fixed $589,000 Fixed All fixed $356,000 Fixed Although overhead costs were related to revenues throughout the company, the experience in Brazil suggested to the managers that they should incorporate information from a published index of Brazilian prices in the distribution sector to forecast overhead in a manner more likely to capture the economics of the business Following instructions from the corporate offices, the controller's office in Brazil collected the following information for monthly operations from last year. Month Price Index 116 112 109 129 113 Cases 255,000 339,000 256,000 435,000 343,000 380.000 460,000 483,000 341,000 418,000 408,000 484,000 124 124 123 143 Operating costs $5,699, 173 5,806,672 5,849,939 5,927,651 5,939, 169 6,043,398 5,918,529 6, 133,902 6, 126, 164 6,186,659 6.208.833 6,362.289 10 134 133 11 143 Although overhead costs were related to revenues throughout the company, the experience in Brazil suggested to the managers that they should incorporate information from a published index of Brazilian prices in the distribution sector to forecast overhead in a manner more likely to capture the economics of the business. Following instructions from the corporate offices, the controller's office in Brazil collected the following information for monthly operations from last year. Month Price Index 116 112 109 Cases 255,000 339.000 256.000 435,000 343,000 380,000 460,000 483,000 341,000 418.000 400,000 484,000 129 113 124 124 123 Operating costs $5,699. 173 5.806,672 5,849,939 5.927, 651 5,939,169 6,043, 398 5,918,529 6,133,902 6, 126, 164 6,186,659 6,208.833 6,362, 289 143 133 These data are considered representative for both past and future operations in Brazil. b. Use the high-low method to compute an estimate of operating costs assuming that 450,000 cases will be shipped next month. (Round variable cost to 5 decimal places. Round Intermediate calculations and final answer to nearest whole dollar amount.) Estimate of operating cost
