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    High Low Method Costs for McDonalds

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    1) Below is the following data on McDonald's restaurants and related labor costs. Perform an analysis using the high low method and develop a cost equation.

    Mc Donald' s Store Labor Costs Sales $'s
    1 423,529 $1,323,527
    2 537,218 $1,790,729
    3 336,000 $ 840,000
    4 427,275 $1,424,250

    2) Assume the following based on the cost equation you developed for the above information. What is the predicted labor cost for the following sales volumes -

    Sales Labor Costs

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    Solution Preview

    In the high low method, we take the highest and the lowest value to get the variable and the fixed cost
    High is - Cost 537,218 and Sales 1,790,729
    Low is - Cost 336,000 and Sales 840,000
    We then ...

    Solution Summary

    The solution explains the use of high low method to develop the cost function.