Problem 6-38 Nation's Capital Fitness, Inc. operates a chain of fitness centers in the Washington, DC, area. The whole firm's controller is accumulating data to be used in preparing its annual profit plan for the coming year. Centers The cost behavior pattern of the firm's equipment maintenance costs must be determined. The account 01,2,5) og staff has suggested the use of an equation, in the form of Y a +bX. for maintenance costs. Data 3. Cost prediction 500 arding the maintenance hours and costs for last year are as follows: hours of activity, maintenance cost: $4.995 Chapter 6 Activity Analysis, Cost Behavior, and Cost Estimation Month Hours of Maintenance Service 520 490 January February ... March April Maintenance Costs $ 4.470 4,260 2,820 4,350 2,960 4,200 300 500 May ... June. 3,000 3,600 4,050 July August September ... October .... November ......... December ........ Total 3,300 470 350 340 320 3,160 3,030 $43,200 4,800 Average ................... 400. $ 3,600 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. 2. Using your answer to requirement (1), what is the variable component of the maintenance cost? 3. Compute the predicted maintenance cost at 590 hours of activity. 4. 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. (CMA, adapted)