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			420
	February		7,000			480
	March		7,531			510
	April		8,140			380
	May		9,787			450
	June		8,490			350
	July		12,024			580
	August		7,500			320

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)