Question 2 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 Operating Costs $ 350,000 Behavior All variable 215.000 $150,000 fixed 1,200,000 $190,000 fixed 855,000 $550,000 fixed 215,000 $125,000 fixed Warehouse labor 860,000 $140,000 fixed Equipment leases 760,000 $600,000 fixed Data processing equipment 945,000 All fixed Other 850,000 $400,000 fixed Total $6,250,000 Although overhead costs were related to revenues throughout the company, the experience in Brazil suggested to Page 22 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 Cases Price Index Operating Costs 1 345,000 115 $5,699,139 2 362,000 117 5,806,638 3 358,000 118 5,849,905 4 380,000 122 5,927,617 5 374,000 124 5,939,135 6 395,000 125 6,043,364 7 367,000 128 5,918,495 8 412,000 133 6,133,868 9 398,000 133 6,126,130 10 421,000 132 6,186,625 11 417,000 136 6,208,799 12 432.000 139 6,362,255 These data are considered representative for both past and future operations in Brazil. Required a. Prepare an estimate of operating costs assuming that 450,000 cases will be shipped next month based on the controller's analysis of accounts. b. Use the high-low method to prepare an estimate of operating costs assuming that 450,000 cases will be shipped next month.