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		6,900			420
	February		8,040			610
	March		9,799			710
	April		9,687			670
	May		8,390			540
	June		7,350			410
	July		9,390			630
	August		7,431			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)