Using Regression to Calculate Fixed Cost, Calculate the Variable Rate, Construct a Cost Formula, and Determine Budgeted Cost Pizza Vesuvio makes specialty pizzas. Data for the past eight months were collected:
|
Month
|
Labor Cost
|
Employee Hours
|
|
January
|
$7,000
|
|
|
360
|
|
February
|
8,140
|
|
|
550
|
|
March
|
9,899
|
|
|
630
|
|
April
|
9,787
|
|
|
590
|
|
May
|
8,490
|
|
|
480
|
|
June
|
7,450
|
|
|
350
|
|
July
|
9,490
|
|
|
570
|
|
August
|
7,531
|
|
|
310
|
Coefficients shown by a regression program for Pizza Vesuvio's data are:
|
Intercept
|
4,481
|
|
X Variable
|
8.32
|
Required:
Use the results of regression to make the following calculations:
1. Calculate the fixed cost of labor. $
Calculate the variable rate per employee hour. $per employee hour
2. Construct the cost formula for total labor cost. Total labor cost = $ + ($ × Employee hours)
3. Calculate the budgeted cost for next month, assuming that 670 employee hours are budgeted. Round answer to the nearest dollar. $