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Caiman Distribution Partners is the Brazilian distribution company of a U.S. consumer products firm. Inflation in Brazil has made bidding and budgeting difficult for marketing managers trying to penetrate some of the country's rural regions. The company expects to distribute 450,000 cases of products in Brazil next month. The controller has classified operating costs (excluding costs of the distributed product) as follows.

Account	Operating Cost			Behavior
Supplies	$	1,955,000		All variable
Supervision		213,000		$	143,000	Fixed
Truck expense		1,250,000		$	196,000	Fixed
Building leases		872,000		$	552,000	Fixed
Utilities		220,000		$	128,000	Fixed
Warehouse labor		849,000		$	120,000	Fixed
Equipment leases		749,000		$	604,000	Fixed
Data processing equipment		949,000		All fixed
Other		856,000		$	361,000	Fixed
Total	$	7,913,000

Although overhead costs were related to revenues throughout the company, the experience in Brazil suggested to the managers that they should incorporate information from a published index of Brazilian prices in the distribution sector to forecast overhead in a manner more likely to capture the economics of the business.

Following instructions from the corporate offices, the controller's office in Brazil collected the following information for monthly operations from last year.

Month	Cases	Price Index	Operating Costs
1	240,000	118	$5,699,177
2	319,000	126	5,806,676
3	241,000	111	5,849,943
4	451,000	120	5,927,655
5	308,000	120	5,939,173
6	386,000	123	6,043,402
7	455,000	133	5,918,533
8	491,000	140	6,133,906
9	320,000	133	6,126,168
10	438,000	140	6,186,663
11	433,000	139	6,208,837
12	492,000	137	6,362,293

These data are considered representative for both past and future operations in Brazil.

b. Use the high-low method to compute an estimate of operating costs assuming that 450,000 cases will be shipped next month. (Round variable cost to 5 decimal places. Round intermediate calculations and final answer to nearest whole dollar amount.)

Answer 1