question archive EXERCISE 3–10 High–Low Method; Predicting Cost [LO2] Great Eastern Inns has a total of 2,000 rooms in its chain of motels located in eastern Canada
EXERCISE 3–10 High–Low Method; Predicting Cost [LO2] Great Eastern Inns has a total of 2,000 rooms in its chain of motels located in eastern Canada
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EXERCISE 3–10 High–Low Method; Predicting Cost [LO2]
Great Eastern Inns has a total of 2,000 rooms in its chain of motels located in eastern Canada. On average, 70% of the rooms are occupied each day. The company’s operating costs are $42 per occupied room per day at this occupancy level, assuming a 30-day month. This $42 figure contains both variable and fixed cost elements. During February, the occupancy rate dropped to only 45%. A total of $1,584,000 in operating cost was incurred during February.
Required:
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 50% during March. What total operating costs would you expect the company to incur during March?
