Question

17 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 10 Month January February March April points Occupancy-Days 3,030 3.08 3,989 1,630 1,270 2,110 650 3,690 1,950 4,410 1,600 2.230 June July August September October November December Electrical Costs $ 9,844 $ 9,234 $ 11,913 $ 6, 194 $ 4,826 $ 8,018 $ 2.47 $11,552 $ 7,448 $12.998 $ 6, 080 $ 8,474 eBook Print 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 I per month 2. What other factors in addition to occupancy.days are likely to affect the variation in electrical costs from month to month? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be

Answer 1

Answer 1

Month	Occupancy Days	Electrical Cost
October	4410	12998
July	650	2470
Difference	3760	10528

Varaiable Cost of Electricity per Occupancy Day = Change in Electricity Cost/Change in Occupancy Days = 10528/3760 = 2.80 per occupany day

Fixed Cost = Total Cost - Variable Cost = 12998 - (4410*2.80) = 12998 - 12348 = 650

Answer 2 & 3

Sales	65000
Variable Expenses	45500
Contribution Margin	19500
Fixed Expenses	14040
Net Operating Income	5460
Degree of Operating Leverage (CM / Net Operating Income)	3.57
Increase in Sales (%)	5%
Increase in Operating Profit (%) [Operating Leverage * Increase in Sales)	17.86%

Answer 4

Sales	65000
Variable Expenses	14040
Contribution Margin	50960
Fixed Expenses	45500
Net Operating Income	5460
Degree of Operating Leverage (CM / Net Operating Income)	9.33