McKnight, a large hotel chain, has been using activity-based costing to determine the cost of a night's stay at their hotels.

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One of the activities, "Inspection," occurs after a customer has checked out of a hotel room.

McKnight inspects every 10th room and has been using "number of rooms inspected" as the cost driver for inspection costs. A significant component of inspection costs is the cost of the supplies used in each inspection. Jennifer Devlins, the chief inspector, is wondering whether inspection labor-hours might be a better cost driver for inspection costs.

Jennifer gathers information for weekly inspection costs, rooms inspected, and inspection labor-hours as follows:

Week	Rooms Inspected			Inspection Labor-Hours			Inspection Costs
1		250			80			$1,700
2		318			124			2,460
3		331			96			2,210
4		427			137			2,750
5		200			62			1,360
6		235			75			1,650
7		248			122			1,680
8		321			141			2,160

Requirements:

Jennifer runs regressions on each of the possible cost drivers and estimates these cost functions:

1.	Explain why rooms inspected and inspection labor-hours are plausible cost drivers of inspection costs.
2.	Plot the data and regression line for rooms inspected and inspection costs. Plot the data and regression line for inspection labor-hours and inspection costs. Which cost driver of inspection costs would you choose? Explain.
3.	Jennifer expects inspectors to inspect 296 rooms and work for 119 hours next week. Using the cost driver you chose in requirement 2, what amount of inspection costs should Jennifer budget? Explain any implications of Jennifer choosing the cost driver you did not choose in requirement 2 to budget inspection costs.