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EXERCISE 6-1 Applying the High-Low Method; Predicting Cost [LO2-CC9] The Peak View Hotel's occupancy-days and custodial supplies expense over the last seven months were
EXERCISE 6-1 Applying the High-Low Method; Predicting Cost [LO2-CC9] The Peak View Hotel's occupancy-days and custodial supplies expense over the last seven months were as follows: Month March April May June July August Occupancy-Days 18,000 12,500 15,000 29,500 24,000 19,000 14,500 Custodial Supplies Expense $22,000 20,600 20,250 30,000 27,100 22,750 20,750 September 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 13,000 occupancy-days? 9
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