Question

Hydraulics Unlimited had the following 12 months of data on purchasing costs and number of purchase orders.

Month Purchasing Cost Number of Purchase Orders
January $57,226 457
February 93,178 745
March 70,925 567
April 54,985 432
May 70,232 561
June 90,259 723
July 78,963 631
August 72,687 582
September 86,234 689
October 94,255 753
November 74,891 598
December 80,199 642

Using the high-low method, what is the variable rate for purchasing cost based on the number of purchase orders? (Round to the nearest whole dollar.)

1) $150
2) $122
3) $102
4) $175

Answer 1

The variable rate for purchasing cost based on the number of purchase orders using the high-low method is approximately $122.

Step-by-step explanation:

To find the variable rate for purchasing cost based on the number of purchase orders using the high-low method, we need to compare the highest and lowest values of both the purchasing cost and the number of purchase orders.

From the given data, the highest number of purchase orders is 753 in October, with a corresponding purchasing cost of $94,255. The lowest number of purchase orders is 432 in April, with a corresponding purchasing cost of $54,985.

Using these values, we can calculate the variable rate: ($94,255 - $54,985) / (753 - 432) = $39,270 / 321 ≈ $122.