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The following information applies to the questions displayed below. ] Nation s Capital Fitness, Inc., operates a chain of fitness centers in the Washington, D
The following information applies to the questions displayed below.
Nations Capital Fitness, Inc., operates a chain of fitness centers in the Washington, DC 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 highlow 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 $
February
March
April
May
June
July
August
September
October
November
December
Total $
Average $
Rounded
Required:
Using the highlow 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 decimal places and other answer to the nearest whole dollar amount.
Monthly maintenance cost X
Using your answer to requirement what is the variable component of the maintenance cost? Round your answer to decimal places.
Variable maintenance cost per hour
Compute the predicted maintenance cost at hours of activity.
Maintenance cost
a Compute the variable cost per hour and the fixed cost per hour at hours of activity. Round your answers to decimal places.
Variable cost per hour
Fixed cost per hour
b Why is the fixed cost per hour possibly misleading?
multiple choice
Because it will not change as the number of hours changes.
Because it will change as the number of hours changes.
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