Using High-Low to Calculate Fixed Cost, Calculate the Variable Rate, and Construct a Cost Function

Pizza Vesuvius makes specialty pizzas. Data for the past eight months were collected:

Month Labor Cost ($)Employee HoursJanuary6,900400February8,040590March9,799680April9,687650May8,390520June7,350390July9,390610August7,431350

Pizza Vesuvius'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 and use in subsequent requirements. 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.

$per employee hour

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

Total labor cost = $+ ($ Employee hours)