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 out for one day. The hotel's business is highly seasonal, with peaks occurring during the ski season and in the summer.

Month	Occupancy- Days	Electrical Costs
January	3,180	$	6,510
February	2,920	$	6,261
March	3,780	$	7,392
April	2,160	$	5,569
May	650	$	1,820
June	2,050	$	5,261
July	4,050	$	7,829
August	4,070	$	7,896
September	1,780	$	4,984
October	570	$	1,596
November	1,580	$	4,424
December	2,680	$	5,908

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)

     

	Occupancy Electrical Days Costs High activity level Low activity level Change Variable cost per occupancy-day Fixed cost element

Answer 1

Estimate the costs with High-Low Method Occupancy Days Electrical Costs High level of Activity 4070 7896 low level of Activity 570 1596 Difference 3500 6300 Answer Varaible cost (6300/3500) 1.80 Per Occupancy day Fixed Cost (7896-(4070*1.80) 570 Per Month