Question

Month Labor Cost($) Employee Hours January 9,590 530 February 7,100 620 March 7,631 660 April 8,240 490 May 9,887 570 June 8,590 450 July 12,682 740 August 7,600 410 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. 330 5. 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)

can someone help me understand these problem please?

Answer 1

Answer 2 - 16.91

Explanation-

Variable Rate = Highest Activity Cost - Loest Activity / Highest Activity Employee Hour - Lowest  Activity Employee Hour

Variable Rate = 12,682 - 7,100 / 740 - 410

= 5,582 / 330

= $16.91 employee per hour

Answer 3- Formula

Total Labour Cost = Fixed Cost + ( Variable Rate * Employee per hour)

= $ 330 + ( $16.91 * Employee per hour)

  

Note -  Highest activity cost is in the month of July as well as highest activity unit is in the same month.

Lowest activity cost is in the month of February but lowest activity is in the month of August

* Answer 1 is already mentioned in your Image.