Reference no: EM132640696

Using High-Low to Calculate Fixed Cost, Calculate the Variable Rate, and Construct a Cost Function Pizza Vesuvius makes specialty pizzas. Data for the past eight months were collected:

Month                Labor Cost ($)       Employee Hours

January             6,900                        400

February           8,040                         590

March                  9,799                      680

April                     9,687                       650

May                      8,390                        520

June                    7,350                        390

July                      9,390                         610

August                    7,431                      350

Pizza Vesuvius'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 and use in subsequent requirements. If required, round your final answers to the nearest cent.

Required:

Problem 1. Using the high-low method, calculate the fixed cost of labor.

Problem 2. Using the high-low method, calculate the variable rate.

Problem 3. Using the high-low method, construct the cost formula for total labor cost.

Total labor cost = $ + ($ × Employee hours)