Cornerstone Exercise 3.6 Using Multiple Regression Results to Construct and Apply a Cost Formula The controller for Dohini Manufacturing Company felt that the number of purchase orders alone did not explain the monthly purchasing cost. He knew that nonstandard orders (for exam- ple, one requiring an overseas supplier) took more time and effort. He collected data on the number of nonstandard orders for the past 12 months and added that information to the data on purchasing cost and total number of purchase orders oeeCTE CORNERSTONE3 Purchasing Cost $18,860 18,065 19,250 18,050 19,345 19.500 19,670 20,940 19,430 N.mber of Purchase Number of Nonstandard Ordens 53 35 61 14 73 January February 330 370 410 May 450 july August 30 80 51 50 560 440 18,800 19,340 November 470 27 Multiple regression was run on the above data; the coefficients shown by the regression program are: 14,460 (rounded to the nearest dollar) X variable 1 8.92 (rounded to the nearest cent) X variable 2 20.39 (rounded to the nearest ent) Required I. Construct the cost formula for the purchasing activity showing the fixed cost and the vari- 2. If Dohini Manufacturing Company estimates that next month will have 430 total purchase able rate. orders and 45 nonstandard orders, what is the total estimated purchasing cost for that month? (Round your answer to the nearest dollar.) What if Dohini Manufacturing wants to estimate purchasing cost for the coming year and expects 5,340 purchase orders and 580 nonstandard orders? What will estimated total pur chasing cost be? What is the total fixed purchasing cost? Why doesn't it equal the fixed cost calculated in Requirement 2? (Round your answers to the nearest dollar.) Cornerstone Exercise 3.6 Using Multiple Regression Results to Construct and Apply a Cost Formula The controller for Dohini Manufacturing Company felt that the number of purchase orders alone did not explain the monthly purchasing cost. He knew that nonstandard orders (for exam- ple, one requiring an overseas supplier) took more time and effort. He collected data on the number of nonstandard orders for the past 12 months and added that information to the data on purchasing cost and total number of purchase orders oeeCTE CORNERSTONE3 Purchasing Cost $18,860 18,065 19,250 18,050 19,345 19.500 19,670 20,940 19,430 N.mber of Purchase Number of Nonstandard Ordens 53 35 61 14 73 January February 330 370 410 May 450 july August 30 80 51 50 560 440 18,800 19,340 November 470 27 Multiple regression was run on the above data; the coefficients shown by the regression program are: 14,460 (rounded to the nearest dollar) X variable 1 8.92 (rounded to the nearest cent) X variable 2 20.39 (rounded to the nearest ent) Required I. Construct the cost formula for the purchasing activity showing the fixed cost and the vari- 2. If Dohini Manufacturing Company estimates that next month will have 430 total purchase able rate. orders and 45 nonstandard orders, what is the total estimated purchasing cost for that month? (Round your answer to the nearest dollar.) What if Dohini Manufacturing wants to estimate purchasing cost for the coming year and expects 5,340 purchase orders and 580 nonstandard orders? What will estimated total pur chasing cost be? What is the total fixed purchasing cost? Why doesn't it equal the fixed cost calculated in Requirement 2? (Round your answers to the nearest dollar.)
