Refer to the data in E3–1.

Data from E3-1

The Lakeshore Hotel’s guest-days of occupancy and custodial supplies expense over the last seven months were:

Guest-days is a measure of the overall activity at the hotel. For example, a guest stay at the hotel lasting for three days is counted as three guest-days.

Required
1. Prepare a scattergraph using the data from E3–1. Plot cost on the vertical axis and activity on the horizontal axis. Fit a regression line to your plotted points by visual inspection.

2. What is the approximate monthly fixed cost according to the scattergraph and 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.

Month March April May June July August September Guest-days of occupancy 4,000 6,500 8,000 10,500 12,000 9,000 7,500 Custodial supplies expense 7,500 8,250 10,500 12,000 13,500 10,750 9,750