xercise 3-10 High-Low Method; Predicting Cost [LO2]

Prairie Motels has a total of 2,000 rooms in its chain of motels located in eastern Canada. On average, 50% of the rooms are occupied each day. The companys operating costs are $18 per occupied room per day at this occupancy level, assuming a 30-day month. This $18 contains both variable and fixed cost elements. During April, the occupancy rate dropped to only 40%. A total of $507,300 in operating cost was incurred during April.

Required:

1. Estimate the variable cost per occupied room per day. (Do not round intermediate calculations and round your final answer to 2 decimal places.)

2. Estimate the total fixed operating costs per month.

3. Assume that the occupancy rate increases to 55% during May. What total operating costs would you expect the company to incur in May? (Do not round intermediate calculations.)