
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Transcribed Image Text: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
9,790
360
February
7,300
420
March
7,831
450
April
8,440
340
May
10,087
390
June
8,790
310
July
11,496
500
August
7,800
280
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.
2. Using the high-low method, calculate the variable rate.
| per employee hour
3. Using the high-low method, construct the cost formula for total labor cost.
Total labor cost -
|× Employee hours)
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