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Question - The Lakeshore Hotel's occupancy-days and custodial supplies expense over the last seven months were as follows:
Month Occupancy-Days Custodial Supplies Expense
March 18,650 $19,180
April 13,020 19,300
May 15,780 21,580
June 30,450 25,900
July 27,900 30,340
August 19,400 23,890
September 15,800 22,430
Occupancy-days are a measure of the overall activity at the hotel. For example, when a guest stays at the hotel for three days, it is counted as three occupancy-days.
Required -
1. Using the high-low method, estimate a cost formula for custodial supplies expense.
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 14,600 occupancy-days?
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