Answered Essay: The Lakeshore Hotel’s guest-days of occupancy and custodial supplies expe

 The Lakeshore Hotel’s guest-days of occupancy and custodial supplies expense over the last seven months were:
 Month Guest-Day of Occupancy Custodial Supplies Expense March 4,000 \$ 7,500 April 6,500 \$ 8,250 May 8,000 \$ 10,500 June 10,500 \$ 12,000 July 12,000 \$ 13,500 August 9,000 \$ 10,750 September 7,500 \$ 9,750
 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.
 Required: 1. Using the high-low method, estimate a cost formula for custodial supplies expense. (Round the Variable cost per guest-day to 2 decimal points.)

 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 11,000 guest-days? (Do not round your intermediate calculations.)

 3 Prepare a scattergraph using the data given above. (Place custodial supplies expense on the vertical axis and guest-days on the horizontal axis.)

Instructions:

 1 On the graph below, use the point tool (Mar) to plot custodial supplies expense on the vertical axis and guest-days on the horizontal axis. 2 Repeat the same process for the plotter tools (Apr, May, June, July, Aug, Sep). 3 To enter exact coordinates, click on the point and enter the values of x and y. 4 To remove a point from the graph, click on the point and select delete option.

(1) Total cost (C) = F + V x Q, where F Fixed cost, V: Unit varible cost, Q: Number of Guest-days

Using high-low method,

V = (Total cost when Q is maximum – Total cost when Q is minimum) / (Maximum Q – Minimum Q)

= \$(13,500 – 7,500) / (12,000 – 4,000) = \$6,000 / 8,000 = \$0.75

When Q = 4,000 days, C = \$7,500

7,500 = F + 0.75 x 4,000

7,500 = F + 3,000

F = \$4,500

Total cost equation: C (\$) = 4,500 + 0.75Q

(2) When Q = 11,000,

C (\$) = 4,500 + (0.75 x 11,000) = 4,500 + 8,250 = 12,750

(3) Scatterplot as follows.

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