Question
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
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.
Required:
1. Determine the high point and the low point.
Month with high number of purchase orders
-
Month with low number of purchase orders
-
2. Calculate the variable rate for purchasing cost based on the number of purchase orders. (Round to the nearest cent.)
$ per purchase order
3. Calculate the fixed monthly cost of purchasing.
$
4. Write the cost formula for the purchasing activity showing the fixed cost and the variable rate.
Total purchasing cost
=
$
+
($
x
- Select your answer -Units Months Purchase ordersVariable rate Fixed costMixed costItem 7 )
5. If Dohini Manufacturing Company estimates that next month will have 430 purchase orders, what is the total estimated purchasing cost for that month?
$
6. What if Dohini Manufacturing wants to estimate purchasing cost for the coming year and expects 5,340 purchase orders? What will estimated total purchasing cost be?
$
What is the total fixed purchasing cost?
$
Why doesn't it equal the fixed cost calculated in Requirement 3 above?
Dohini Manufacturing Company had the following 12 months of data on purchasing cost and number of purchase orders.
Required:
1. Determine the high point and the low point.
Month with high number of purchase orders | - |
Month with low number of purchase orders | - |
2. Calculate the variable rate for purchasing cost based on the number of purchase orders. (Round to the nearest cent.)
$ per purchase order
3. Calculate the fixed monthly cost of purchasing.
$
4. Write the cost formula for the purchasing activity showing the fixed cost and the variable rate.
Total purchasing cost | = | $ | + | ($ | x | - Select your answer -Units Months Purchase ordersVariable rate Fixed costMixed costItem 7 ) |
5. If Dohini Manufacturing Company estimates that next month will have 430 purchase orders, what is the total estimated purchasing cost for that month?
$
6. What if Dohini Manufacturing wants to estimate purchasing cost for the coming year and expects 5,340 purchase orders? What will estimated total purchasing cost be?
$
What is the total fixed purchasing cost?
$
Why doesn't it equal the fixed cost calculated in Requirement 3 above?
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