Chapter 3 Question 6

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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. 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? $ $ What is the total fixed purchasing cost? $ Why doesn't it equal the fixed cost calculated in Requirement 3 above