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: Employee Hours Month January February $7,000 8,140 9,899 April 9,787 May 8,490 June 7,450 July 9,490 August 7,531 Coefficients shown by a regression program for Pizza Vesuvio's data are: Intercept 4,497 X Variable Labor Cost March 8.26 360 550 630 600 480 350 570 310 In your calculations, round the variable rate per employee hour to the nearest cent.
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: Employee Hours Month January February $7,000 8,140 9,899 April 9,787 May 8,490 June 7,450 July 9,490 August 7,531 Coefficients shown by a regression program for Pizza Vesuvio's data are: Intercept 4,497 X Variable Labor Cost March 8.26 360 550 630 600 480 350 570 310 In your calculations, round the variable rate per employee hour to the nearest cent.
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
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Chapter3: Cost Behavior And Cost Forecasting
Section: Chapter Questions
Problem 20BEA: Using Regression to Calculate Fixed Cost, Calculate the Variable Rate, Construct a Cost Formula, and...
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Question
Transcribed Image Text: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:
Employee Hours
Month
January
February
March
April
May
June
July
August
Labor Cost
$7,000
8,140
9,899
9,787
8,490
7,450
9,490
7,531
Coefficients shown by a regression program for Pizza Vesuvio's data are:
360
550
630
600
480
350
570
310.
Intercept
4,497
X Variable
8.26
In your calculations, round the variable rate per employee hour to the nearest cent.
Required:
Use the results of regression to make the following calculations:
1. Calculate the fixed cost of labor.
17,430 X
Calculate the variable rate per employee hour.
7.40 X per employee hour
Transcribed Image Text:Required:
Use the results of regression to make the following calculations:
1. Calculate the fixed cost of labor.
17,430 X
Calculate the variable rate per employee hour.
7.40 X per employee hour
2. Construct the cost formula for total labor cost.
Total labor cost-$ 5,237 X+($ 7.40 Xx Employee hours)
3. Calculate the budgeted cost for next month, assuming that 705 employee hours are budgeted. Round answer to the nearest dollar.
5,217 X
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Check My Work
1. The measures of activity output are the intercept and X-variable.
2. Use this fixed cost and variable rate in the cost formula.
3. Use this fixed cost, and the variable rate in the cost formula multiplied by 705.
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