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		9,490			490
	February		7,000			570
	March		7,531			610
	April		8,140			460
	May		9,787			530
	June		8,490			420
	July		12,240			680
	August		7,500			380

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)