Question 1. 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:

MonthLabor Cost($)Employee HoursJanuary9,390350February6,900410March7,431430April8,040320May9,687380June8,390300July10,876490August7,400270

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.

$fill in the blank 1

2.Using the high-low method, calculate the variable rate.

$fill in the blank 2

per employee hour

3.Using the high-low method, construct the cost formula for total labor cost.

Total labor cost = $fill in the blank 3

+ ($fill in the blank 4

Employee hours)

Question 2. Using Regression to Calculate Fixed Cost, Calculate the Variable Rate, Construct a Cost Formula, and Determine Budgeted Cost

Pizza Vesuvio makes specialty pizzas. Data for the past 8 months were collected:

MonthLabor CostEmployee HoursJanuary$6,900360February8,140550March9,899630April9,787600May8,490480June7,450350July9,490570August7,531310

Coefficients shown by a regression program for Pizza Vesuvio's data are:

Intercept4,431X Variable8.37

In your calculations, round the variable rate per employee hour to the nearest cent.

Required:

Use the results of regression to make the following calculations:

1.Calculate the fixed cost of labor.

$fill in the blank 1

Calculate the variable rate per employee hour.

$fill in the blank 2

per employee hour

2.Construct the cost formula for total labor cost.

Total labor cost = $fill in the blank 3

+ ($fill in the blank 4

Employee hours)

3.Calculate the budgeted cost for next month, assuming that 685 employee hours are budgeted. Round answer to the nearest dollar.

$fill in the blank 5