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

Question

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

Explanation / Answer

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

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