1. Using the high-low method of cost estimation, estimate the behavior of the maintenance costs incurred by Nation’s Capital Fitness, Incorporated. Express the cost behavior pattern in equation form.Note: Round coefficient of X to 2 decimal places and other answer to the nearest whole dollar amount.2.2. Using your answer to requirement 1, what is the variable component of the maintenance cost?Note: Round your answer to 2 decimal places. Required informationPR 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'scontroller is accumulating data to be used in preparing its annual profit plan for the coming year. The cost behavior patternof the firm's equipment maintenance costs must be determined. The accounting staff has suggested the use of anequation, in the form of Y= a + bx, for maintenance costs. Data regarding the maintenance hours and costs for last yearare as follows:MonthJanuaryFebruaryMarchAprilMayJuneJulyAugustSeptemberOctoberNovemberDecemberTotalAverageHours ofMaintenanceService5404902504603504703204104603803503404,820402MaintenanceCosts$ 5,1784,2302,8004,3303,0304,1403,0903,5404,0403,2103,2003,070$ 43,858$ 3,655

The high-low method is used to separate the fixed and variable costs from the mixed costs of…

Answered: Using the high-low method of cost…

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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1. Using the high-low method of cost estimation, estimate the behavior of the maintenance costs incurred by Nation’s Capital Fitness, Incorporated. Express the cost behavior pattern in equation form.

Note: Round coefficient of X to 2 decimal places and other answer to the nearest whole dollar amount.

2. Using your answer to requirement 1, what is the variable component of the maintenance cost?

Note: Round your answer to 2 decimal places.

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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