Liberty Bell Fitness, Inc. operates a chain of fitness centers in Philadelphia. The firms controller is accumulating data to be used in preparing its annual profit plan for the coming year. The cost behavior pattern of the firms equipment maintenance costs must be determined. The accounting staff has suggested the use of 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	Hours of Maintenance Service			Maintenance Costs
January		550		$	5,149
February		490			4,220
March		280			2,800
April		490			4,280
May		350			3,040
June		430			4,100
July		340			3,080
August		440			3,500
September		460			3,970
October		360			3,250
November		360			3,160
December		330			3,050
Total		4,880		$	43,599
Average		407		$	3,633

Using the high-low method of cost estimation, estimate the behavior of the maintenance costs incurred by Liberty Bell Fitness, Inc. Express the cost behavior pattern in equation form. (Round "Variable cost per hour" to 2 decimal places.)

2.

Using your answer from requirement 1, what is the variable component of the maintenance cost?(Round your answer to 2 decimal places.)

3.

Compute the predicted maintenance cost at 680 hours of activity.

4-a.	Compute the variable cost per hour and the fixed cost per hour at 690 hours of activity. (Round your answers to 2 decimal places.)

Why the fixed cost per hour could be misleading?

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