Problem - The Lakeshore Hotel's guest-days of occupancy and custodial supplies expense over the last seven months were:
|
Month
|
Guest-Days of
Occupancy
|
Custodial Supplies
Expense
|
|
March
|
2,840
|
$17,100
|
|
April
|
4,500
|
$22,200
|
|
May
|
5,000
|
$23,400
|
|
June
|
4,270
|
$19,700
|
|
July
|
7,070
|
$29,367
|
|
August
|
7,020
|
$28,000
|
|
September
|
3,080
|
$17,600
|
Guest-days is a measure of the overall activity at the hotel. For example, a guest who stays at the hotel for three days is counted as three guest-days.
Requirement 1: Using the high-low method, estimate a cost formula for custodial supplies expense where X is the number of guest-days.
Requirement 2: Using the cost formula you derived above, what amount of custodial supplies expense would you expect to be incurred at an occupancy level of 4,590 guest-days?