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 Labor Cost($) Employee Hours 9,690 510 7,200 7,731 620 February 590 March April 8,340 470 May 9,987 June 8,690 July 12,846 August 7,700 390 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. $ 99 x

Please help with these ASAP. I don't understand what I am doing wrong.

Answer 1

1) Fixed cost = total cost of high labour - variable cost (high labour hour)

= 12,846 - 16.6 (700)

= 12,846 - 11,620

= 1,226

2) Variable cost = high cost - low cost / high labour - low labour

= 12,846 - 7,700 / 700 - 390

= 5,146 / 310

= 16.6 per employee hour

3) total labour cost = 1,226 + 16.6 (employee hour)