Question

Required:

1. VC/unit

2. FC

3. Formula

Problem 6-38 Capital Fitness, Inc. operates a chain of fitness centres in the Ottawa area. The firm's controller is ac- umulating data to be used in preparing its annual profit plan for the coming year. The cost behaviour attern of the firm's equipment maintenance costs must be determined. The accounting staff has sug- ested the use of an equation, in the form of Y = a + bx, for maintenance costs. Data regarding the naintenance hours and costs for last year are as follows: Hours of Maintenance Month Maintenance Service Costs January.. 525 $ 4,710 February 505 4,310 March 310 2,990 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 S43,680 Average..... 405 S 3,640 April. 495

Answer 1

Calculation of Variable cost and Fixed Cost

Part 1) Variable cost per unit

=(Highest activity cost - Lowest activity cost)/( Highest activity hours - Lowest activity hours)

=(4710 - 2950)/(525 - 310) = 8.19 per unit( Rounded off)

Part 2) Fixed cost

= Highest activity cost - (Highest activity hours * variable cost per unit)

= 4710 - (525*8.19) = 410.25

Part 3 Formulas mentioned above