The paper “ Cost Management Questions” is a forceful example of an assignment on finance & accounting. Marshall Engineering makes trailers using sheet metal. As a new employee of the company, you have been asked to review the current purchasing data and number of purchase orders during the previous 12 months of 2013. Month (2013) Purchasing Costs $ Number of Purchasing 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 Required: using this data: Determine the high point and low point during the last 12 months? From the data given above, the high point during the last 12 months was in August where the purchasing orders were 560 with a purchasing cost of $20,940.
The low point was in February where the purchasing orders were 330 with a purchasing cost of $18,065.Calculate the variable rate for purchasing cost based on the number of purchase orders. To find the variable rate for purchasing cost based on the number of purchase orders, we regress the purchasing cost against the number of purchase orders. Using excel, the variable rate for purchasing cost based on the number of purchase orders is $9.74 per order. Calculate the fixed monthly cost of purchasing the sheet metal. Following the same procedure in (2) above, the fixed monthly cost of purchasing the sheet metal is $15,020.79.If Marshall Engineering estimates that January will have 430 purchase orders, what is the estimated purchasing cost for January? Using the fixed monthly cost of purchasing the sheet metal and the variable rate for purchasing cost based on the number of purchase orders, the estimated purchasing cost for January would be; Estimated purchasing cost = $15,020.79 + ($9.74 per order x 430 purchase orders) = $15,020.79 + $4,188.2 = $19,209.Now Marshall Engineering wants to estimate purchasing cost for the full year 2014 and expects 5,340 purchase orders. What will estimates the total purchasing cost be?
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