Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

a)Using the high-low method of cost estimation, estimate the behavior of the maintenance costs incurred by Yellow Theory Fitness. Express the cost behavior pattern in

image text in transcribed

a)Using the high-low method of cost estimation, estimate the behavior of the maintenance costs incurred by Yellow Theory Fitness. Express the cost behavior pattern in equation form.

b)Using your answer to requirement a), what is the variable component of the maintenance cost?

c)Compute the predicted maintenance cost at 590 hours of activity.

d)Compute the variable cost per hour and the fixed cost per hour at 600 hours of activity. Explain why the fixed cost per hour could be misleading.

Yellow Theory, Inc. operates a chain of fitness centres in the Montreal area. The firm's VP of Finance 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 predict equipment maintenance costs. Data for the most recent 12 months of activity is outlined in Table A. Table A Month January February March April May June July August September October November December Total Hours of Maintenance Service 520 490 300 500 310 480 320 400 470 350 340 320 4,800 Maintenance Costs $4,470 4,260 2,820 4,250 2,960 4,200 3,000 3,600 4,050 3,300 3,160 3,030 $43,100

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting Information Systems

Authors: Marshall B. Romney

8th Edition

0201357216, 9780201357219

More Books

Students also viewed these Accounting questions