Question

Help Save & Exit Suomi Check my work 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 upancy-Days 3,350 3,610 1,680 1,230 4,380 1,690 4,130 4,250 1,950 2,140 1,480 2,710 Electrical Costs $ 9,241 $ 9,666 $ 5,208 $ 3,813 $10,428 $ 5,239 $10,058 $10,125 $ 6,045 $ 6,634 $ 4,588 $ 7,829 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 10 of 12

Answer 1

High low method uses high and low activity level to determine fixed cost of electricity and variable cost of electricity per occupancy day
Variable cost of electricity	(High occupancy days cost - Low occupancy days cost)/(High occupancy days-Low occupancy days)
Variable cost of electricity	(10428-3813)/(4380-1230)
Variable cost of electricity	6615/3150
Variable cost of electricity	$2.10	per occupancy day
Fixed costs of occupancy	10428-(4380*2.10)
Fixed costs of occupancy	10428-9198
Fixed costs of occupancy	$1,230	per month