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 Maintenance Service Costs 540 $5,178 490 4,230 250 2,800 1330 4,330 750 460 320 350 3,030 4,140 DI 470 320 320 3,090 410 3,540 460 4,040 380 3,210 350 3,200 340 3,070 4,820 $ 43,858 402 $ 3,655

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 Maintenance Service Costs 540 $5,178 490 4,230 250 2,800 1330 4,330 750 460 320 350 3,030 4,140 DI 470 320 320 3,090 410 3,540 460 4,040 380 3,210 350 3,200 340 3,070 4,820 $ 43,858 402 $ 3,655

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

1. Compute the variable cost per hour and the fixed cost per hour at 680 hours of activity.

2. Why is the fixed cost per hour possibly misleading?

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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