High-Low Method; Predicting Cost
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Resort Inns, Inc., has a total of 2,000 rooms in its nationwide chain of motels. On average, 70% of the rooms are occupied each day. The Company's operating costs are $21.00 per occupied room per day at this occupancy level, assuming a 30-day Month. This $21.00 figure contains both variable and fixed cost elements. During October, the occupancy rate dropped to only 45%. A total of $792,000 in operating cost was incurred during October.
1. Estimate the variable cost per occupied room per day.
2. Estimate the total fixed operating costs per month.
3. Assume that the occupancy rate increases to 60% during November. What total operating costs would you expect the company to incur during November?
Would you please show me the steps and solution to this problem so I can have a better understanding on future problems.
Thank You
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Solution Summary
Excel file contains calculation of variable cost per occupied room per day and total fixed operating costs per month.
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