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Using Regression to Calculate Fixed Cost, Calculate the Variable Rate, Construct a Cost Formula, and...

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Accounting

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 8 months were collected:

Month Labor Cost Employee Hours
January $7,000 360
February 8,140 550
March 9,899 630
April 9,787 610
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 4,517
X Variable 8.20

In your calculations, round the variable rate per employee hour to the nearest cent.

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 675 employee hours are budgeted. $

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