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Using High-Low to Calculate Fixed Cost, Calculate the Variable Rate, and Construct a Cost Function...

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Accounting

  1. 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 8 months were collected:

    Month Labor Cost($) Employee Hours
    January 9,390 530
    February 6,900 620
    March 7,431 660
    April 8,040 490
    May 9,687 570
    June 8,390 450
    July 12,614 740
    August 7,400 410

    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, round your final answers to the nearest cent.

    Required:

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

    2. Using the high-low method, calculate the variable rate. $ per employee hour

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

    Total labor cost = $ + ($ Employee hours)

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