Answer Happy

Nation's Capital Fitness, Inc., operates a chain of fitness centers in the Washington, D.C., area. The firm's controller is accumulating data to be used in preparing its annual profit plan for the coming year. The cost behavior pattern of the firm's equipment maintenance costs must be determined. The accounting staff has suggested the use of the high-low method to develop an equation, in the form of Y= a + bx, for maintenance costs. Data regarding the maintenance hours and costs for last year are as follows: Month January February March April May June July August September October November December Total Average "Rounded Problem 6-38 Part 1 Hours of Maintenance Service 540 470 250 460 340 470 340 430 460 350 380 320 4,810 401 Maintenance Costs $5,031 4, 190 2,740 4, 270 3, 010 4,110 3,010 3,520 4,010 3,250 3,180 3,090 $43, 411. $ 3,618*
Problem 6-38 Part 1 Required: 1. Using the high-low method of cost estimation, estimate the behavior of the maintenance costs incurred by Nation's Capital Fitness, Inc. Express the cost behavior pattern in equation form. (Round coefficient of X to 2 decimal places and other answer to the nearest whole dollar amount.) Monthly maintenance cost = X
2. Using your answer to requirement 1, what is the variable component of the maintenance cost? (Round your answer to 2 decimal places.) Variable maintenance cost per hour
Problem 6-38 Part 3 3. Compute the predicted maintenance cost at 670 hours of activity. Maintenance cost
Problem 6-38 Part 4 4-a. Compute the variable cost per hour and the fixed cost per hour at 680 hours of activity. (Round your answers to 2 decimal places.) Variable cost per hour Fixed cost per hour 4-b. Why is the fixed cost per hour possibly misleading? O Because it will change as the number of hours changes. O Because it will not change as the number of hours changes.