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