EXERCISE $3$ Applying the High$$Low Method; Predicting Cost$$

The Lakeshore Hotel$$s occupancy$-$days and custodial supplies expense over

the last seven months were as follows:

Month Occupancy$-$Days Custodial SuppliesExpense

March $18,000$$$22,500$

April $12,50020,850$

May $15,00020,250$

June $28,50028,850$

July $24,00027,100$

August $19,00022,750$

September $14,50020,750$

Occupancy$-$days are a measure of the overall activity at the hotel. For

example, when a guest stays at the hotel for three days, it is counted as

three occupancy$-$days.

Required:

$1.$ Using the high$$low method, estimate a cost formula for custodial

supplies expense.

$2.$ Using the cost formula you derived above, what amount of

custodial supplies expense would you expect to be incurred at an

occupancy level of $13,000$ occupancy$-$days?