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		9,690			310
	February		7,200			360
	March		7,731			380
	April		8,340			290
	May		9,987			340
	June		8,690			260
	July		10,892			430
	August		7,700			240

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 variable rate.

2. Using the high-low method, calculate the fixed cost of labor.

3. Using the high-low method, construct the cost formula for total labor cost.

Total labor cost = $ + ($ Employee hours)