Question

1. Using High-Low to Calculate Predicted Total Variable Cost and Total Cost for Budgeted Output

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

   	Month	Labor Cost		Employee Hours
   	January		$6,900		410
   	February		$9,799		600
   	March		$8,040		680
   	April		$9,687		660
   	May		$8,390		530
   	June		$7,431		400
   	July		$9,390		620
   	August		$7,350		360

   Assume that this information was used to construct the following formula for monthly labor cost.

   Total Labor Cost = $6572 + ($2.16 x Employee Hours)

   Required:

   Assume that 705 employee hours are budgeted for the month of September. Use the total labor cost formula for the following calculations:

   1. Calculate total variable labor cost for September. Round your answer to nearest whole number.
   $

   2. Calculate total labor cost for September. Round your answer to nearest whole number.
   $

Answer 1

1) Total variable labor cost = 2.16*705 = 1523

2) Total labor cost = Variable cost+Fixed cost = 1523+6572 = 8095