Using Regression Results to Construct and Apply a Cost Formula

Dohini Manufacturing Company had the following 12 months of data on purchasing cost and number of purchase orders.

Month		Purchasing Cost		Number of Purchase Orders
January		$18,860		370
February		18,065		330
March		19,250		370
April		18,050		410
May		19,345		400
June		19,500		450
July		19,670		460
August		20,940		560
September		19,430		440
October		20,020		500
November		18,800		470
December		19,340		480

The controller for Dohini Manufacturing ran regression on the data, and the coefficients shown by the regression program are:

Intercept	15,021 (rounded to the nearest dollar)
X variable 1	9.74 (rounded to the nearest cent)

Required:

1. Construct the cost formula for the purchasing activity showing the fixed cost and the variable rate.

Total purchasing cost

=

$

+

($ Purchase orders)

2. If Dohini Manufacturing Company estimates that next month will have 480 purchase orders, what is the total estimated purchasing cost for that month? (Round your answer to the nearest dollar.) $

3. 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? (Round your answer to the nearest dollar.) $

What is the total fixed purchasing cost? $

Why doesn't it equal the fixed cost calculated in Requirement 1 above?

because there are 12 months in the year