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 Electrical Costs 2,710 $ 5,270 3,600 $ 6,205 860 $ 2,150 2,170 $ 4,350 4,200 $ 7,160 1,530 $ 3,825 4,110 $ 7,050 4,060 $ 6,925 1,980 $ 4,090 1,160 $ 2,900 1,210 $ 3,025 2,480 $ 4,910 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.) per occupancy-day Variable cost of electricity Fixed cost of electricity per month

Answer 1

1.

Variable cost = (Cost at highest activity - Cost at lowest activity) /(Highest activity-Lowest activity) = (7160 - 2150) /(4200-860) = 1.50 Fixed cost = Total cost - total Variable cost = 7160 - (4200*1.50) = 860

As HOMEWORKLIB RULES, I solved your first question