Bourbon House, a luxury waterfront restaurant, has store hours fluctuate from week to week. Its utilities costs and hours of operation for the last six (6) weeks are as follow:

week hours of operation utilities cost

1 55 6480

2 60 6600

3 64 7460

4 70 7600

5 45 5400

6 40 5200

Required: a) Use the high-low method to estimate the cost behaviour for the restaurant's utilities costs, assuming that variable costs vary in proportion to the hours of operation. Express the cost behaviour in a cost function (Y = a + bX). (4 marks)

b) During the second week of June, Bourbon House will be opened for 49 hours. Predict the restaurant's total utilities cost for the week. (2 marks)

c) Explain the impact of a decrease in the level of activity on (i) total variable cost; and (ii) variable cost per unit of activity. (1 mark)