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 8 months were collected: Month Labor Cost Employee Hours January $6,800 420 February $9,699 610 March $7,940 710 April $9,587 670 May $8,290 540 June $7,331 410 July $9,290 630 August $7,250 370 Assume that this information was used to construct the following formula for monthly labor cost. Total Labor Cost = $6499 + ($2.03 x Employee Hours) Required: Assume that 665 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. Round your answer to nearest whole number.

Explanation / Answer

Solution:

Given data:

Pizza vesuvio specialty cost of goods a& variable cost and total cost

*Let’s as assume 665 employee hours are budgeted for the September month.

*By using total cost variable labour for September we my calcluate cost.

Total labour cost = $ 6,499 +( $2.03 * employee hours)

Fixed cost = $ 6,499 From the above equation :

*Variable cost per unit = $ 2.03

*Employee hours = 665

(1): To calculate the variable cost for September :

                         = Employee hours * variable cost per unit

                         = 665*$ 2.03

     Therefore variable cost          =1,349.95

(2): Total labour cost :

                        = Variable cost + fixed cost

                        = 1,349.95 +6,499

                        = 7848.95

Therefore total cost =7848.95

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