a large hotel? chain, has been using? activity-based costing todetermine the cost of a? night's stay at their hotels.

One of the? activities, "Inspection," occurs after a customerhas checked out of a hotel room.

Fitzgerald

inspects every

10th

room and has been using? "number of rooms? inspected" as thecost driver for inspection costs. A significant component ofinspection costs is the cost of the supplies used in eachinspection.

Dawn

McAdams?,

the chief? inspector, is wondering whether inspection?labor-hours might be a better cost driver for inspection costs.

Dawn

gathers information for weekly inspection? costs, rooms?inspected, and inspection? labor-hours as? follows:

Week	Rooms Inspected	Inspection Labor-Hours	Inspection Costs
Week 1	260	85	$1,800
Week 2	328	129	2,560
Week 3	341	101	2,310
Week 4	437	142	2,850
Week 5	200	67	1,460
Week 6	245	80	1,750
Week 7	258	127	1,780
Week 8	331	146	2,260

Dawn

runs regressions on each of the possible cost drivers andestimates these cost? functions:

                                               Inspection

Costs=$246.60

?+

?($6.17

x Number of rooms? inspected)

                                               Inspection

Costs=$787.71

?+

?($11.94

x Inspection? labor-hours)

1.	Explain why rooms inspected and inspection? labor-hours areplausible cost drivers of inspection costs.
2.	Plot the data and regression line for rooms inspected andinspection costs. Plot the data and regression line for inspection?labor-hours and inspection costs. Which cost driver of inspectioncosts would you? choose? Explain.
3.	Dawn expects inspectors to inspect 306 rooms and work for 124 hours next week. Using the cost driver you chose in requirement? 2,what amount of inspection costs should Dawn ?budget? Explain any implications of Dawn choosing the cost driver you did not choose in requirement 2 tobudget inspection costs.