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 $7,000 360
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
Assume that this information was used to construct the following formula for monthly labor cost.
Total Labor Cost = $5,237 + ($7.40 x Employee Hours)
Required:
Assume that 4,000 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.
2. Calculate total fixed labor cost for the coming year.
3. Calculate total labor cost for the coming year.
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