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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:

Month
Labor Cost
Employee Hours

January
$7,000

360

February
8,140

550

March
9,899

630

April
9,787

590

May
8,490

480

June
7,450

350

July
9,490

570

August
7,531

310

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

Intercept
4,481

X Variable
8.32

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 670 employee hours are budgeted. Round answer to the nearest dollar.
$
 
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