USING HIGH-LOW TO CALCULATE FIXED COST, CALCULATE THE VARIABLE RATE, AND CONSTRUCT A COST FUNCTION Pizza Vesuvio makes specialty pizzas. Vesuvio’s controller wants to calculate the fixed and variable costs associated with labor used in the restaurant. Data for the past eight months were collected:

Month Labor Cost ($) Employee Hours January 7,000 360 February 8,140 550 March 9,010 585 April 9,787 610 May 8,490 480 June 2,450 350 July 9,490 570 August 7,531 310 Required:

Using the high-low method, calculate the fixed cost of labor, calculate the variable rate per employee hour, and construct the cost formula for total labor cost.

Cornerstone Exercise