3.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 eight months were collected:

Month	Labor Cost	Employee Hours
January	$6,900			360
February	8,140			550
March	9,899			630
April	9,787			590
May	8,490			480
June	7,450			350
July	9,490			570
August	7,531			310

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

Intercept	4,415
X Variable	8.43

3-3. Calculate the budgeted cost for next month, assuming that 705 employee hours are budgeted. Round answer to the nearest dollar.

_______?_________

2.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 eight months were collected:

Month	Labor Cost($)	Employee Hours
	January		7,200			420
	February		8,340			610
	March		10,099			720
	April		9,987			670
	May		8,690			540
	June		7,650			410
	July		9,690			630
	August		7,731			370

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, use rounded calculations in intermediate steps. 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)

1.Big Thumbs Company manufactures portable flash drives for computers. Big Thumbs incurs monthly depreciation costs of $14,300 on its plant equipment. Also, each drive requires materials and manufacturing overhead resources. On average, the company uses 8,700 ounces of materials to manufacture 5,800 flash drives per month. Each ounce of material costs $3.00. In addition, manufacturing overhead resources are driven by machine hours. On average, the company incurs $23,200 of variable manufacturing overhead resources to produce 5,800 flash drives per month.

In your calculations, round variable rate per flash drive to the nearest cent. If required, round final answers to the nearest cent.

Total cost of flash drives = $____14300______ + ($________?_______ x Number of flash drives)

What is the total variable cost (assume that 6,000 units is within the company's current relevant range)? $____?_______

What is the total manufacturing cost (i.e., both fixed and variable) (assume that 6,000 units is within the company's current relevant range)? $_______?______