High$-$Low Method to Determine Fixed Cost and Variable Rate

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 $$18,860370$

February $18,040330$

March $19,250370$

April $18,050410$

May $19,345400$

June $19,500450$

July $19,670460$

August $20,920570$

September $19,430440$

October $20,020500$

November $18,800470$

December $19,340480$

Required:

$1.$ Determine the high point and the low point.

Month with high number of purchase orders

August

Month with low number of purchase orders

February

$2.$ Calculate the variable rate for purchasing cost based on the number of purchase orders. $($Round to the nearest cent.$)$

$fill in the blank $3$

per purchase order

$3.$ Calculate the fixed monthly cost of purchasing.

$fill in the blank $4$

$4.$ Write the cost formula for the purchasing activity showing the fixed cost and the variable rate. Round variable rate to the nearest cent.

Total purchasing cost $=$ $fill in the blank $5$

$+($$fill in the blank $6$

x

Purchase orders

$)$

$5.$ If Dohini Manufacturing Company estimates that next month will have $420$ purchase orders, what is the total estimated purchasing cost for that month?

$fill in the blank $8$

$6.$ What if Dohini Manufacturing wants to estimate purchasing cost for the coming year and expects $5,350$ purchase orders? What will estimated total purchasing cost be$?$

$fill in the blank $9$

What is the total fixed purchasing cost?

$fill in the blank $10$

Why doesn't it equal the fixed cost calculated in Requirement $3$ above?

because the high$-$low method can no longer be used