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    Variable and Fixed Costs

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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 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 Hours of Maintenance
    Service Maintenance
    Costs
    January 520 $ 4,470
    February 490 4,260
    March 300 2,820
    April 500 4,350
    May 310 2,960
    June 480 4,200
    July 320 3,000
    August 400 3,600
    September 470 4,050
    October 350 3,300
    November 340 3,160
    December 320 3,030
    Total 4,800 $ 43,200

    Average 400 $ 3,600

    Required:

    1-a.
    Using the high-low method of cost estimation, estimate the behavior of the maintenance costs incurred by Nation's Capital Fitness, Inc.
    Variable cost per hour $
    Fixed cost per month $

    1-b.
    Express the cost behavior pattern in equation form

    Maintenance cost = $ + $ X

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    https://brainmass.com/business/accounting/variable-and-fixed-costs-437338

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