Project #59846 - Managerial Accounting Basic Homework

[The following information applies to the questions displayed below.]

 Liberty Bell Fitness, Inc. operates a chain of fitness centers in Philadelphia. 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 MaintenanceService MaintenanceCosts January 525 \$ 4,710 February 505 4,310 March 310 2,990 April 495 4,200 May 315 3,000 June 485 4,215 July 315 2,950 August 405 3,680 September 475 4,100 October 345 3,250 November 350 3,260 December 335 3,015 Total 4,860 \$ 43,680 Average 405 \$ 3,640

1.

Using the high-low method of cost estimation, estimate the behavior of the maintenance costs incurred  by Liberty Bell Fitness, Inc. Express the cost behavior pattern in equation form.

Monthly Maintenance Cost = _______ + __________ X

 2 Using your answer from requirement 1, what is the variable component of the maintenance cost?   Maintenance Cost _________ per hour
 3 Compute the predicted maintenance cost at 600 hours of activity.   ___________
4-a.

Compute the variable cost per hour and the fixed cost per hour at 610 hours of activity. (Round "Fixed cost per hour" to 2 decimal places.)

Variable Cost per hour:______  Fixed Cost Per hour: ___________

 4B.  Why the fixed cost per hour could be misleading?

 Because it will change as the number of hours changes. Because it will not change as the number of hours changes.

 Subject Business Due By (Pacific Time) 02/27/2015 11:00 am
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