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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 ofY=a+bX, for maintenance costs. Data regarding the maintenance hours and costs for last year are as follows:

Month. Hours of Maintenance Service. Maintenance Costs

January 560 $5,530

February 490 4,170

March 250 2,740

April 490 4,340

May 350 2,980

June 470 4,130

July 320 3,020

August 430 3,550

September 480 3,990

October 390 3,260

November 380 3,170

December 370 3,040

Total 4,980 $43,920

Average 415* $3,660*

1. Compute the variable cost per hour and the fixed cost per hour at 670 hours of activity.(Round your answers to 2 decimal places.)

Variable cost per hour. ____________

Fixed cost per hour. ____________

1. Why is the fixed cost per hour possibly misleading?

• Because it will not change as the number of hours changes.
• Because it will change as the number of hours changes.

Variable maintenance cost. ___________ per hour

Maintenance cost. _____________

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 ofXto 2 decimal places and other answer to the nearest whole dollar amount.)

Monthly maintenance cost =. _______ + __________ X