Nation's Capital Fitness, Inc., operates a chain of fitness centers in the Washington, D.C., area. The...
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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: Month January February March April May June July August September October November December Total Average *Rounded Hours of Maintenance Service 560 450 270 470 320 440 360 420 460 350 360 330 4,790 399* Maintenance Costs $ 5,427 4,230 2,730 4,310 3,030 4,170 3,100 3,590 3,980 3,230 3,220 3,040 $44,057 $ 3,671* 4-a. Compute the variable cost per hour and the fixed cost per hour at 700 hours of activity. (Round your answers to 2 decimal places.) Variable cost per hour Fixed cost per hour 4-b. Why is the fixed cost per hour possibly misleading? Because it will change as the number of hours changes. Because it will not 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: Month January February March April May June July August September October November December Total Average *Rounded Hours of Maintenance Service 560 450 270 470 320 440 360 420 460 350 360 330 4,790 399* Maintenance Costs $ 5,427 4,230 2,730 4,310 3,030 4,170 3,100 3,590 3,980 3,230 3,220 3,040 $44,057 $ 3,671* 4-a. Compute the variable cost per hour and the fixed cost per hour at 700 hours of activity. (Round your answers to 2 decimal places.) Variable cost per hour Fixed cost per hour 4-b. Why is the fixed cost per hour possibly misleading? Because it will change as the number of hours changes. Because it will not change as the number of hours changes.
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Related Book For
Managerial Accounting Creating Value in a Dynamic Business Environment
ISBN: 978-0078110917
9th edition
Authors: Ronald W. Hilton
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