Homework SourseUsing HighLow to Calculate Predicted Total Variable Cost and
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:
Assume that this information was used to construct the following formula for monthly labor cost.
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.
| 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 |
Solution
Answer:
1. Calculate total variable labor cost for the coming year.
variable labor
= $7.40 x Employee Hours
=7.40x4000
=29600
variable labor=$29600
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2. Calculate total fixed labor cost for the coming year.
fixed labor=$5237
__________________________________________________________
3. Calculate total labor cost for the coming year.
Total Labor Cost
= $5,237 + ($7.40 x Employee Hours)
=5237 +7.40*4000
=5237+29600
=34837
Total Labor Cost=$34,837
