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 Labor Cost($) Employee Hours

January 9,690 300

February 7,200 350

March 7,731 370

April 8,340 280

May 9,987 320

June 8,690 250

July 10,652 410

August 7,700 230

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.

$

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)