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.

Transcribed Image Text:

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