High-Low Method to Determine Fixed Cost and Variable Rate McGarvey Manufacturing Company had the following 12 months of data on purchasing cost and number of purchase orders. Number of Purchase Month Purchasing Cost Orders January $19,250 370 February 18,050 330 March 18,200 320 April 18,050 410 May 19,345 400 June 19,500 450 July 19,670 460 August 20,940 560 September 19,430 440 October 20,020 600 November 18,800 470 December 19,340 480 Required: 1. Determine the high point and the low point. Month with high number of purchase orders Month with low number of purchase orders October March 2. Calculate the variable rate for purchasing cost based on the number of purchase orders. (Round to the nearest cent.) 6.5 per purchase order 3. Calculate the fixed monthly cost of purchasing. 15,676 X August 20,940 560 September 19,430 440 October 20,020 600 November 18,800 470 December 19,340 480 Required: 1. Determine the high point and the low point. Month with high number of purchase orders Month with low number of purchase orders October March 2. Calculate the variable rate for purchasing cost based on the number of purchase orders. (Round to the nearest cent.) 6.5 per purchase order 3. Calculate the fixed monthly cost of purchasing. 15,676 X 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 12,820 x + 6.5 x Purchase orders ) 5. If McGarvey Manufacturing Company estimates that next month will have 480 purchase orders, what is the total estimated purchasing cost for that month? 15,940 X 6. What if McGarvey Manufacturing wants to estimate purchasing cost for the coming year and expects 6,000 purchase orders? What will estimated total purchasing cost be? 153,840 x What is the total foxed purchasing cost? 225,840 x Why doesn't it equal the fixed cost calculated in Requirement 3 above? because there are 12 months in the year