Question

1. 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 430 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?
   $

Answer 1