Question

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		530		$	4,948
February		480			4,260
March		290			2,740
April		460			4,330
May		320			2,990
June		430			4,140
July		330			3,000
August		430			3,530
September		450			4,000
October		350			3,240
November		360			3,190
December		330			3,050
Total		4,760		$	43,418
Average		397		$	3,618

4-a.	Compute the variable cost per hour and the fixed cost per hour at 620 hours of activity. (Round your answers to 2 decimal places.) Variable cost per hour Fixed cost per hour

           

Answer 1

Paga No. Date poate Calculation : = Variable Cost Per unit Highest activity cost - lowest activity Cost Highest activity Hows- lowest hours 4948 - 2740 530 - 290 - 2203 240 = 89.2 Per unit Fixed cost = Highest - activity Cost - variable & I cost/h6 Highest ] activity br / 4948 - (9.2 X 530) 4948 - 4876 $ 72 - Cost equation is $9.2X + $72 Variable cost per hour will be same at all devel within relevant range, so variable Cost per hour at 620 hours of activity is $ 9.2 Pes hows. Fixed cost per hour = 72 - $0.12 620 - Variable cost pel hour Fixed cost per hour $ 9.2 g0.12