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 January February occupancy-Days 2. 2,360 March April 2.62 2,090 4,470 4,020 Electrical Costs 513,200 $14,300 $ 4.900 $ 12.100 $10,450 $ 18,860 $17,160 $ 16,760 $ 8,150 $ 5,450 $ 6,950 June July August September October November December 1.09 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 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 wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.) Systematic factors the guests, switching off fans and lights

Answer 1

Answer:

1.

	Occupancy Days	Electrical Cost
High Activity Level (A)	$4,470	$18,860
Low Activity Level (B)	$980	$4,900
Change (A - B)	$3,490	$13,960
Variable Cost of electricity ($13,960 / $3,490)	$4	Per Occupancy Days
Fixed cost of electricity	$980

Working:

Total Fixed Cost = High activity level cost- High activity level unit * Variable cost

= $18,860 - $4,470 * 4

= $980

2.

a. Systematic factor like guests , switching, off fans and light

b. Seasonal factor like winter or summer.