Question

Saved Help Exercise 5A-1 High-Low Method (LO5-10) 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 Electrical Costs 2,640 $13,200 2,860 $14,300 980 $ 4,900 2,420 $12, 100 2,090 $10,450 4,470 $18,860 4,020 $17,160 3,940 $16,760 1,630 $8.150 1.090 $ 5,450 1,390 $ 6,95€ 2.910 $14,550 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

High occupancy day in

june = 4470 occupancy days with 18860 electrical costs

lowest occupancy days in march with

980 occupancy days with $4900 electrical cost

under high-low cost method

variable cost per day =

( highest activity cost - lowest activity cost ) / ( highest occupancy days - lowest )

= (18860-4900) / (4470-980)

= 13960 / 3490

= $ 4 per day

fixed cost = highest activity cost - ( variable cost * highest occupancy days )

= 18860 - ( 4*4470)

= 980 $

fixed cost per month = $ 980

variable cost = $4 per occupancy day

note:

provide feedback immediately which hepls me to correcting my method to provide quality answers