Compute the predicted maintenance cost at 670 hours of activity.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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1. Compute the predicted maintenance cost at 670 hours of activity.
![Required information
PR 6-38 (Algo) High-Low Method; Fitness Centers (LO 6-1, 6-2, 6-5)
[The following information applies to the questions displayed below.]
Nation's Capital Fitness, Incorporated, 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 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
Hours of
Maintenance
Service
540
490
250
460
350
470
320
410
460
380
350
340
4,820
402
Maintenance
Costs
$ 5,178
4,230
2,800
4,330
3,030
4,140
3,090
3,540
4,040
3,210
3,200
3,070
$ 43,858
$ 3,655](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb87f551d-3fc5-4766-9e3a-b14ac4833b45%2F72435f03-4bfa-44a8-80ec-91f42bb74b16%2F99bnlbs_processed.png&w=3840&q=75)
Transcribed Image Text:Required information
PR 6-38 (Algo) High-Low Method; Fitness Centers (LO 6-1, 6-2, 6-5)
[The following information applies to the questions displayed below.]
Nation's Capital Fitness, Incorporated, 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 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
Hours of
Maintenance
Service
540
490
250
460
350
470
320
410
460
380
350
340
4,820
402
Maintenance
Costs
$ 5,178
4,230
2,800
4,330
3,030
4,140
3,090
3,540
4,040
3,210
3,200
3,070
$ 43,858
$ 3,655
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