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		9,590			490
	February		7,100			570
	March		7,631			610
	April		8,240			460
	May		9,887			530
	June		8,590			420
	July		12,460			680
	August		7,600			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)