Refer to the data for Lakeshore Hotel in Exercise 3-8.
Data From Ex 3-8
Month............. Guest-Days of Occupancy.............. Custodial Supplies Expense
March .................................................... 4,000........................................ $7,500
April ...................................................... 6,500........................................ $8,250
May ....................................................... 8,000........................................ $10,500
June ..................................................... 10,500........................................ $12,000
July ..................................................... 12,000 ........................................$13,500
August .................................................. 9,000 ........................................$10,750
September .............................................7,500 ...........................................$9,750
Required:
1. Prepare a scattergraph using the data from Exercise 3-8. Plot cost on the vertical axis and activity on the horizontal axis. Using a ruler, fit a straight line to your plotted points.
2. Using the quick-and-dirty method, what is the approximate monthly fixed cost? The approximate variable cost per guest-day?
3. Scrutinize the points on your graph and explain why the high-low method would or would not yield an accurate cost formula in this situation.