The Lakeshore Hotel's guest-days of occupancy and custodial supplies expense over the last seven months were:
Month Guest-Days of Custodial Supplies
Occupancy Expense
- March 2,800 $17,400
- April 4,490 $22,500
- May 5,040 $23,000
- June 4,260 $19,900
- July 7,070 $31,918
- August 7,000 $27,600
- Sept 3,000 $18,100
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.
1. Using the high-low method, estimate a cost formula for custodial supplies expense where X is the number of guest-days.
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 4,610 guest-days?