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Assume you are the purchasing manager at Block for materlals used in the chlo reader. You have observed that as the company has increased its sales volume, the total cost to process purchase orders has increased as well, but not at a constant rate. You would like to estimate the cost to process purchase onders next month. You gather the following data for the last eight quarters. $($See data to the right.$)$

Required

$2.$ Prepare a scatter diagram that shows the relationship between the number of purchase orders and purchase department costs for the last eight quarters. Based upon the scamer diagam, are purchasing department costs fixed, variable or mixed?

b$.$ Estimate the average purchasing cost per purchase order at the low and hiph point of purchase orders using data from the chart. Assume no ovitlers in your analysh.

c$.$ Use the high$-$low method to develop a cost$-$estimating equation for tatal annual operating costs.

d$.$ If purchases for nest quarter are expected to be $9,600$ unite, what are expected purchasing department costs?

e$.$ What are some reasons why the total cost to process purchase onders in not ferening at $1$ constant rate? What trends do you expect is the average cost per unit in the purchasing department?

Solution Summary

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Excel Hela

Morsoforison Creating a Chart $($RC$)$

Mixersh Hele on Oreating a Chart $($Mes$)$

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