Question

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 January February March Labor Cost($) Employee Hours 9,490 7,000 7,531 8,140 9,787 8,490 April May June July 13,416 7,500 August 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. 17.42 x per employee hour 3. Using the high-low method, construct the cost formula for total labor cost. Total labor costs * Employee hours)

Answer 1

Variable cost : Highest Actiucty Cost- lowes Activity cost Higher Activity units lower Activity unita = $13,416- $ 4500 770 - 430 $5916 - $17.40 pe employee koue 340 Fixed cost & Potal cost - variable cost = $4500 - 480x414.4 - $4500 – $4482 $18 (1) fixed cost o labor - $18 cal variable Rate - $ 17.4 per employee houe. 39 Cosc formula for tolae labor cose - $ 18 $174x employee hours