Question: Problem #4 10 points Pine Side Hospital wants to determine the behavior pattern of maintenance costs for its X-ray machines. The hospital CEO, Anne Petersen,
Problem #4 10 points
Pine Side Hospital wants to determine the behavior pattern of maintenance costs for its X-ray machines. The hospital CEO, Anne Petersen, has asked the hospitals CFO and cost accountant to work together to get information about their X-ray machines. The two of them accumulated the following data for the past 12 months. Use data below, along with your knowledge of the high/low method, to create a cost equation that estimates total X-ray maintenance costs.
| Month | Hours of Activity | Maintenance Cost |
| January | 113,000 | $1,712 |
| February | 114,000 | $1,716 |
| March | 90,000 | $1,469 |
| April | 110,000 | $1,600 |
| May | 112,000 | $1,698 |
| June | 101,000 | $1,691 |
| July | 104,000 | $1,700 |
| August | 105,000 | $1,721 |
| September | 115,000 | $1,619 |
| October | 97,000 | $1,452 |
| November | 98,000 | $1,399 |
| December | 98,000 | $1,403 |
- Solve for variable cost per unit using the high/low method. Show your work. Round to 3 decimal places.
- Based on your answer in part 1., solve for the fixed-cost component at the high level of activity. Show your work.
- Now prove your answer in part 2. by solving for the fixed-cost component at the low level of activity. Show your work.
- Based on your work in parts 1., 2., and 3., what is your final cost equation to estimate total X-ray maintenance costs that the hospital CEO can use every month? Show your work.
- Using your equation in part 4., assuming an upcoming month is expected to utilize 120,000 X-ray hours, what would be the estimated total maintenance cost? Show your work.
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