Question

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 HoursJanuary $7,300 410February 10,199 600March 8,440 720April 10,087 660May 8,790 530June 7,831 400July 9,790 620August 7,750 360Assume that this information was used to construct the following formula for monthly labor costs.Total Labor Cost = - $7,059 + ($1.92 X Employee Hours)Required:Assume that 3,900 employee hours are budgeted for the coming year. Use the total labor cost formula to make the following calculations:1. Calculate the total variable labor costs for the coming year.2. Calculate the total fixed labor costs for the coming year.3. Calculate total labor costs for the coming year.

Answer 1

Total fixed costs= $7,059

Total variable cost= $7,488

Total cost= $14,547

Step-by-step explanation:

Giving the following information:

Total Labor Cost = -7,059 + ($1.92*Employee Hours)

Required:Assume that 3,900 employee hours are budgeted for the coming year.

The total fixed costs remain constant with production:

Total fixed costs= 7,059

Total variable cost= 1.92*3,900= 7,488

Total cost= $14,547