Question

The Cheyenne Hotel in Big Sky, Montana, has accumulated records of the total electrical costs of the hotel and the number of occupancy-days over the last year. An occupancy-day represents a room rented for one day. The hotel's business is highly seasonal, with peaks occurring during the ski season and in the summer. Month January February March April May June July August September October November December Occupancy-Days 4,260 3,650 3,160 2,150 2.260 1,450 3,180 3,750 2,220 1,580 1,690 2,750 Electrical Costs $15,082 $14,112 $13,272 $ 9,030 $9.492 $ 6,090 $13,356 $14,532 $ 9, 324 $ 6,636 $ 7,098 $11.550 Required: 1. Using the high-low method, estimate the fixed cost of electricity per month and the variable cost of electricity per occupancy-day. (Do not round your intermediate calculations. Round your Variable cost answer to 2 decimal places and Fixed cost element answer to nearest whole dollar amount.) Variable cost of electricity Fixed cost of electricity per occupancy-day per month

Answer 1

Answert Months occupancy / Electrical High-Jan / 4260 $15,082 Loo- Зима | 1450 $6090 Change 2,810 $ 8,992 CHigh- a). variable cost electricity = change in cost change indayo - $8,998/2,810 .: variable cost electricity = $3.2 per occupancy day b) Total cost = Tolal fixed cost + Total variable cost. Total tiged cost • Total cost- Tolal variable cost = $ 6090- (1450 daysx $3.2) i $6090 - $ 4640 .: Fixed cost = $1,450 per month