Using HighLow to Calculate Predicted Total Variable Cost and

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

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

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

Required:

Assume that 675 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.
$

2. Calculate total labor cost for September.

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 labor cost for September = 675*7.4= 4995 2 Total labor cost for September = 5237+4995= 10232