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 eight months were collected:
Month Labor Cost($) Employee Hours
January 4,897 320
February 10,613 480
March 11,276 510
April 8,402 380
May 9,950 450
June 7,739 350
July 6,437 540
August 9,286 420
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.
$__________
