Using Regression to Calculate Fixed Cost, Calculate the Variable Rate, Construct

Question

Using Regression to Calculate Fixed Cost, Calculate the Variable Rate, Construct a Cost Formula, and Determine Budgeted Cost

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

Coefficients shown by a regression program for Pizza Vesuvio's data are:

Required:

Use the results of regression to make the following calculations:

1. Calculate the fixed cost of labor.
$

Calculate the variable rate per employee hour.
$ per employee hour

2. Construct the cost formula for total labor cost.
Total labor cost = $ + ($ × Employee hours)

3. Calculate the budgeted cost for next month, assuming that 675 employee hours are budgeted. Round answer to the nearest dollar.
$

Month Labor Cost Employee Hours January $7,000 360 February 8,140 550 March 9,899 630 April 9,787 600 May 8,490 480 June 7,450 350 July 9,490 570 August 7,531 310

Explanation / Answer

Using Regression to Calculate Fixed Cost, Calculate the Variable Rate, Construct

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