Reference no: EM132638625

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:

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

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

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