Question

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 $82,700

2 ........................................ 1,500 50,375

3 ........................................ 4,400 120,700

4 ........................................ 2,800 81,900

5 ........................................ 2,300 69,775

6 ........................................ 1,200 43,100

7 ........................................ 2,000 62,500

Required

a. Use information from the high- and low-volume months to develop a cost-estimating equation for

monthly order-processing costs.

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.

c. What factors might have caused the difference in the equations developed for requirements (a) and (b)?

* can i have the answer as a text not pictures

Answer 1

Highest Sales order is = 4400 and 120,700

Lowest Sales order is = 1200 and 43,100

Per Sales order , variable processing costs = (120,700 - 43,100) / (4,400 - 1,200)

= $24.25

Fixed costs= 43,100 - 1200 * 24.25 = $14,000

Cost-estimating equation for monthly processing costs =[ $14,000 + $24.25 * sales order ]

Factors might have caused the difference in the equations developed for requirements a and b are variations in the figures/data in between the highest and lowest figures. If there is some costs which are not included in the figures which we have taken up for calculation.