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 per occupied room per day at this occupancy level, assuming a 30-day month. This $21 fi gure contains both variable and fi xed cost elements. During October, the occupancy rate dropped to only 45%. A total of $792,000 in operating cost was incurred during October.
Required:
1. Estimate the variable cost per occupied room per day.
2. Estimate the total fi xed 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?