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 Maintenance
Service
Maintenance
Costs
  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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