CHAPTER 3 High Low Method Forecasting a Mixed Cost
Page 1	In Class Practice				Vesuvio's Pizzeria			Page 3
	HIGH-LOW METHOD
	Labor	Cost				Employee Hours
	January	$ 7,000				360
	February	$ 8,140				550
	March	$ 9,899				630
	April	$ 9,787				610
	May	$ 8,490				480
	June	$ 7,450				350
	July	$ 9,490				570
	August	$ 7,531				310
	FYI: Total Cost=Total Fixed Cost +(Variable Rate * Activity)
	Step 1. Find the High Low Activity for the data set
	Step 2. Estimate the Variable Rate per unit using the High Low data
	VARIABLE RATE	=	High Activity Cost-Low Activity Cost
			High Activity-Low Activity
		=		=
	Step 3. Estimate the fixed cost component using high point data
	Fixed Cost= Total Cost at High Point - (Variable Rate X Activity at High Point)
	Step 4: Form the cost formula for labor cost
	Total Cost = Fixed Cost from Step 3 + (Variable Rate from step 2 * Employee Hours)
	Step 5. Estimate the total labor cost for September based on 675 Employee Hours
	Use your Formula created in step 4 to solve. Show your work.