Assume the local Pearle Vision has the following information on the number of sales orders received...
Assume the local Pearle Vision has the following information on the number of sales orders received and order-processing costs.
|
Month |
Sales Orders |
Order-Processing Costs |
|
|
1 |
3,000 |
$ 99,240 |
|
|
2 |
1,500 |
60,450 |
|
|
3 |
4,400 |
144,840 |
|
|
4 |
2,800 |
98,280 |
|
|
5 |
2,300 |
83,730 |
|
|
6 |
1,200 |
51,720 |
|
|
7 |
2,000 |
75,000 |
Required
(a.) Use information from the high- and low-volume months to
develop a cost-estimating equation for monthly order-processing
costs.
|
Answer |
Answer |
(b.) Plot the data on a scatter diagram. Using the information from
representative high-and low-volume months, develop a cost
estimating equation for monthly production costs.
|
Answer |
Answer |
Homework Answers
| a) | S. ORDER | OP costs | ||
| High | 4400 | 144840 | ||
| low | 1200 | 51720 | ||
| difference | 3200 | 93120 | ||
| Variable cost per order = 93120/3200 = 29.1 | ||||
| Fixed cost = 51720 - (1200*29.1) = 16800 | ||||
| Cost estimating equation : Cost (X)= 29.10X + 16800 | ||||
| b) As per scatter diagram, the higher volume and low | ||||
| volume months and the cost estimating equation of | ||||
| production costs are: | ||||
| High | 4400 | 144840 | ||
| low | 1200 | 51720 | ||
| difference | 3200 | 93120 | ||
| Variable cost per order = 93120/3200 = 29.1 | ||||
| Fixed cost = 51720 - (1200*29.1) = 16800 | ||||
| Cost estimating equation : Cost (X)= 29.10X + 16800 | ||||
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