Managerial accounting 3. 1.00 points Exercise 2-14 High-Low Method: Predicting C

Question

Managerial accounting 3. 1.00 points Exercise 2-14 High-Low Method: Predicting Cost [Lo2-4, Lo2-5] The Lakeshore Hotel' months were s guest-days of occupancy and custodial supplies expense over the last seven Custodial Guest-Day of Supplies Expense Month March April May June July August September Occupancy ,000 7,500 6,500 S 8,250 8,000 10,500 10,500 12,000 2,000 13,500 9,000 10,750 7,500 $ 9,750 Guest-trys 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.) Custodial Guest-Days Supplies Expense High activity level Low activity level Change Variable cost per guest-day Fixed cost per month per guest-day O Type here to search ????????????/????17????????????????????????? ????????????????????????????????????????N ' /1/1/1/1/1/1/1/ 1/1/1/1/1/1/1 N IVVANYYVAVVMYAAAAACCOOOOO

Explanation / Answer

1.

Variable cost = $6000 / 8000 = 0.75

Fixed cost = 13500 - 12000 * .75 = 4500

2.

Guest-Days CustodialSuppliesExpense High activity level 12000 13500 Low activity level 4000 7500 Change 8000 6000 Variable cost per guest-day $ 0.75 per guest-day Fixed cost per month 4500

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