. . . . . . . Problem 6-38 Natlon's Capital Fltness, Inc. operates a chaln of fitness centers In the Washington, DC, area. The High-Low Method' Fitness 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 (LO 6-1 6-2 6-5) ing staff has suggested the use of an equation, in the form of Y = a + 19X, for maintenance costs. Data regarding the maintenance hours and costs for last year are as follows: 3 C i I I" i i ii -i- \"i :2": Hours of Maintenance 7 Month Maintenance Service Costs January ........................................................ 520 ....................................... , ........................ $ 4,470 February 4,260 March ........................................................... 2,820 April .............................................................. 4,350 May .............................................................. 2,960 June ............................................................. 4,200 July ............................................................... 3,000 August .......................................................... 3,600 September ................................................... 4,050 October ........................................................ 3,300 November .................................................... 3,160 December .................................................... 3,030 Total ............................................................. $43,200 Average ....................................................... $ 3,600 266 Chapter 6 Activity Analysis, Cost Behavior, and Cost Estimation Required: 1. Using the highlow 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