Question

The Cheyenn e Hotel in Big Sky. Montana, has accumulated records of the total electrical costs of the hotel and the number of cupancy-days over the last year. An occupancy-day represents a room rented for one day. The hoteľ'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 Electrical Costs $1,620 $8,352 $8,736 $5,190 $7,968 $3,960 $7,668 $8,78e $4,830 $2,49e $4,26e $6,960 Occupancy-Days 548 3,81e 4,10e 1,730 3, 52e 1,320 3,420 4,120 1,610 830 1,42e 2,320 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 intermediat answer to nearest whole dollar amount.) your Variable cost answer to 2 decimal places and Fixed cost elemen per occupancy-day Variable cost of electricity Next > < Prev 3 of 3

Answer 1

Answer 1:

The highest and lowest rows are as follows:

Variable cost per occupancy days = (8780 - 1620) / (4120 - 540) = $2.00

Fixed cost = Total electricity cost - Variable cost

Using January values:

= 1620 - 540 * 2

= $540

Answer 2:

Correct answers are:

Systematic factors like guests, switching off fans and lights

Seasonal factors like winter or summer

Explanation:

Variation in electricity costs from month to month will vary based on number of occupancy days, guest habits like not switching off when not in or when not in use, seasons (in summer AC may be running whereas in winter heaters will be used.

As such options 1 and 4 are correct.

Option 2 is incorrect since number of occupancy days takes care of any variation due to this.

Options 3 and 5 are incorrect since these factors have no relation with variations in electricity costs from month to month