Question
Using High-Low to Calculate Predicted Total Variable Cost and Total Cost for a Time Period that Differs from the Data Period Pizza Vesuvio makes specialty
Using High-Low to Calculate Predicted Total Variable Cost and Total Cost for a Time Period that Differs from the Data Period
Pizza Vesuvio makes specialty pizzas. Data for the past eight months were collected:
Month | Labor Cost | Employee Hours | ||||
January | $7,000 | 390 | ||||
February | 8,140 | 580 | ||||
March | 9,899 | 700 | ||||
April | 9,787 | 640 | ||||
May | 8,490 | 510 | ||||
June | 7,450 | 380 | ||||
July | 9,490 | 600 | ||||
August | 7,531 | 340 |
Assume that this information was used to construct the following formula for monthly labor cost.
Total Labor Cost = $5,294 + ($6.58 X Employee Hours) |
Required:
Assume that 4,000 employee hours are budgeted for the coming year. Use the total labor cost formula to make the following calculations:
1. Calculate total variable labor cost for the coming year. Round your answer to the nearest dollar. $
2. Calculate total fixed labor cost for the coming year. Round your answer to the nearest dollar. $
3. Calculate total labor cost for the coming year. Round your answer to the nearest dollar.
Coefficients shown by a regression program for Pizza Vesuvio's data are:
Intercept | 4,431 |
X Variable | 8.37 |
Required:
Use the results of regression to make the following calculations:
1. Calculate the fixed cost of labor. $
Calculate the variable rate per employee hour. $ per employee hour
2. Construct the cost formula for total labor cost. Total labor cost = $ + ($ Employee hours)
3. Calculate the budgeted cost for next month, assuming that 695 employee hours are budgeted. Round answer to the nearest dollar. $
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