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Cornerstones of Cost Accounting 1st Edition by Don Hansen,Maryanne Mowen
Edition 1ISBN: 978-0538736787Cornerstones of Cost Accounting 1st Edition by Don Hansen,Maryanne Mowen
Edition 1ISBN: 978-0538736787 Exercise 24
HIGH-LOW METHOD TO DETERMINE FIXED COST AND VARIABLE RATE
Suenos 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 Suenos Manufacturing Company estimates that next month will have 430 purchase orders, what is the total estimated purchasing cost for that month?
6. What if Suenos 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?
Suenos 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 Suenos Manufacturing Company estimates that next month will have 430 purchase orders, what is the total estimated purchasing cost for that month?
6. What if Suenos 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
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Verified
1. The high point and the low point of t...
Cornerstones of Cost Accounting 1st Edition by Don Hansen,Maryanne Mowen
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