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		9,790			430
	February		7,300			500
	March		7,831			530
	April		8,440			400
	May		10,087			460
	June		8,790			360
	July		12,376			590
	August		7,800			330

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)