High-Low to Calculate Fixed Cost,

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

Pizza Vesuvio makes specialty pizzas. Vesuvio’s controller wants to calculate the fixed and variable costs associated with labor used in the restaurant. Data for the past eight months were collected: Month                                     Labor Cost($)              Employee Hours January                        6,900                                       350 February                      8,040                                       540 March                          9,799                                       640 April                            9,687                                       600 May                             8,390                                       470 June                             7,350                                       340 July                              9,390                                       560 August                        7,431                                       300 In your calculations, round the variable rate per employee to the nearest cent. If required, round your final answers to the nearest cent. 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)