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 8 months were collected:

Month Labor Cost Employee Hours January $7,200 420

February 10,099 610

March 8,340 700

April 9,987 670

May 8,690 540

June 7,731 410

July 9,690 630

August 7,650 370

Assume that this information was used to construct the following formula for monthly labor cost.

Total Labor Cost = $6,877 + ($2.09 X Employee Hours)

Required:

Assume that 3,800 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.