Question

Exercise 5A-1 High-Low Method (LO5-10) points 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. eBook Hint Month January February March April May June July August September October November December Occupancy-Days 2,710 3,600 860 2,170 4,200 1,530 4,110 4,060 1,980 1,160 1,210 2,480 Electrical Costs $ 5,270 $ 6, 205 $ 2,150 $ 4,350 $ 7,160 $ 3,825 $ 7,050 $ 6,925 $ 4,090 $ 2,900 $ 3,025 $ 4,910 Print References 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 2. What other factors in addition to occupancy-days are likely to affect the variation in electrical costs from 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 automatically graded as incorrect.) 2 Systematic factors like guests, switching off fans and lights. 2 Number of days present in a month. 2 Income taxes paid on hotel income. 2 Seasonal factors like winter or summer. 2 Fixed salary paid to hotel receptionist

Answer 1

Answer:

1
		Occupancy Days	Electrical Cost
High Activity Level		4200	7160
Low Activity Level		860	2150
Change		3340	5010
Variable Cost			1.5	Per Occupancy Days
Fixed cost element			860
Total Fixed Cost= High activity level cost- High activity level unit*Variable cost/unit=Low activity level cost- Low activity level unit* Variable cost/unit
7160-4200*1.5=2150-(1.5*860)
2	a. Systematic factor like guests , switching, off ffans and light
	b. Seasonal factor like winter or summer