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Compute the variable cost per hour

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Reference no: EM132203280

Nation's Capital Fitness, Inc. operates a chain of fitness centers in the Washington, D.C., area. The firm's controller is accumulating data to be used in preparing its annual profit plan for the coming year. The cost behavior pattern of the firm's 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:

MonthHours of Maintenance

ServiceMaintenance

Costs January 540  $4,752  

February 480   4,250  

March 280   2,750  

April 490   4,270  

May 340   2,980  

June 470   4,150  

July 330   3,020  

August 430   3,570  

September 460   4,000  

October 350   3,300  

November 380   3,190  

December 330   3,130 

 Total 4,880  $43,362  

Average 407* $3,614* 

*Rounded

rev: 05_30_2018_QC_CS-128090

  1. Compute the variable cost per hour and the fixed cost per hour at 650 hours of activity. (Round your answers to 2 decimal places.)
  2. Compute the predicted maintenance cost at 640 hours of activity.
  3. Using your answer to requirement (1), what is the variable component of the maintenance cost? (Round your answer to two decimal places.)
  4. 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. (Round coefficient of X to 2 decimal places and other answer to the nearest whole dollar amount.)

Reference no: EM132203280

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