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Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen
Edition 2ISBN: 978-1111824402Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen
Edition 2ISBN: 978-1111824402 Exercise 40
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.
2. Calculate the variable rate for purchasing cost based on the number of purchase orders.
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.
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.
2. Calculate the variable rate for purchasing cost based on the number of purchase orders.
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.
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?
Explanation
Verified
Verified
The purchasing cost and the number of pu...
Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen
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