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
1) Total variable cost for the coming year = 4000*7.40 = $29600
2) Total fixed cost = $5237
3) Total labour cost = 5237+29600 = $34837
