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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. $
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