Answered: Required: 1. Determine the high point…

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter3: Cost Behavior And Cost Forecasting

Section: Chapter Questions

Problem 22BEA: Inventory Valuation under Variable Costing Refer to the data for Judson Company above. Required: 1....

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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. Number of Purchasing Purchase Month January February March April May June July August September October November December Required: Cost $18,860 18.040 19,250 18,050 19,345 19,500 19,670 21.040 19,430 20,020 18,800 19,340 Orders 370 320 370 410 400 450 460 570 440 500 470 480 Required: 1. Determine the high point and the low point. Month with high number of purchase orders Month with low number of purchase orders 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. Round variable rate to the nearest cent. Total purchasing cost = $(?) + $( (?)x(?) )

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
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. Round variable rate to the nearest cent.
Total purchasing cost
5. If Dohini Manufacturing Company estimates that next month will have 420 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 5,330 purchase orders? What will estimated total purchasing cost be?
What is the total fixed purchasing cost?
Why doesn't it equal the fixed cost caloulated in Requirement 3 above?

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