Question
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
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 6 480 2 60 6 600 3 64 7 460 4 70 7 600 5 45 5 400 6 40 5 200 Required: a) Use the high-low method to estimate the cost behaviour for the restaurants 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 restaurants 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) PLEASE SHOW ALL OF YOUR WORKINGS
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