Using Regression to Calculate Fixed Cost, Calculate the Variable Rate, Construct a Cost Formula, and Determine Budgeted Cost

Pizza Vesuvio makes specialty pizzas. Data for the past 8 months were collected:

Month		Labor Cost			Employee Hours
January		$7,000			360
February		8,140			550
March		9,899			630
April		9,787			610
May		8,490			480
June		7,450			350
July		9,490			570
August		7,531			310

Coefficients shown by a regression program for Pizza Vesuvio's data are:

Intercept	4,517
X Variable	8.20

In your calculations, round the variable rate per employee hour to the nearest cent.

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 675 employee hours are budgeted. $