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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?
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