Using High-Low to Calculate Fixed Cost, Calculate the Variable Rate, and Construct a Cost Function Pizza Vesuvio makes specialty pizzas. Data for the past eight months were collected:
Month Labor Cost($) Employee Hours
January 6,800 410
February 7,940 600
March 9,699 690
April 9,587 660
May 8,290 530
June 7,250 400
July 9,290 620
August 7,331 360
Pizza Vesuvio's controller wants to calculate the fixed and variable costs associated with labor used in the restaurant.
In your calculations, round the variable rate per employee hour to the nearest cent. If required, use rounded calculations in intermediate steps. Round your final answers to the nearest cent.
Required:
1a. Using the high-low method, calculate the fixed cost of labor.
1b. Using the high-low method, calculate the variable rate.
______ per employee hour
1c. Using the high-low method, construct the cost formula for total labor cost.
Total labor cost = $ + ($ × Employee hours)
1d.
Assume that this information was used to construct the following formula for monthly labor cost.
Total Labor Cost = $5,094 + ($6.58 x Employee Hours)
Required:
Assume that 635 employee hours are budgeted for the month of September. Use the total labor cost formula for the following calculations:
1d. Calculate total variable labor cost for September. Round your answer to nearest whole number. $
1e. Calculate total labor cost for September. Round your answer to nearest whole number.