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Nations Capital Fitness, Inc. operates a chain of fitness centers in the Washington, D.C., area. The firms controller is accumulating data to be used in

Nations Capital Fitness, Inc. operates a chain of fitness centers in the Washington, D.C., area. 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 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 Hours of Maintenance Service Maintenance Costs
January 530 $ 4,915
February 450 4,220
March 280 2,790
April 450 4,260
May 360 2,960
June 460 4,180
July 340 3,030
August 410 3,510
September 460 4,000
October 390 3,230
November 380 3,250
December 330 3,130
Total 4,840 $ 43,475
Average 403 * $ 3,623 *

*Rounded

Required:

  1. Using the high-low method of cost estimation, estimate the behavior of the maintenance costs incurred by Nations 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.)

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