Cornerstones of Managerial Accounting 6th Edition by Maryanne Mowen,Don Hansen ,Dan Heitger

Exercise 35

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 eight months were collected:

Refer to the information for Pizza Vesuvio on the previous page. Assume that this information was used to construct the following formula for monthly labor cost.

Required:
Assume that 4,000 employee hours are budgeted for the coming year. Use the total labor cost formula to make the following calculations:
1. Calculate total variable labor cost for the year.
2. Calculate total fixed labor cost for the year.
3. Calculate total labor cost for the coming year.