2. Using your answer to requirement 1, what is the variable component of the maintenance cost? (Round your answer to 2 decimal places.) 3. Compute the predicted maintenance cost at 590 hours of activity. 4-a. Compute the variable cost per hour and the fixed cost per hour at 600 hours of activity. (Round your answers to 2 decimal places.)

4-b. Why is the fixed cost per hour possibly misleading? A: Because it will not change as the number of hours changes.

B: Because it will change as the number of hours changes.

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