Question

U Exercise 6A-1 High-Low Method [LO6-10) 24:38 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 Occupancy-Days Electrical Costs January 540 $ 1,620 February 3,810 $ 8,352 March 4,100 $ 8,736 April 1,730 $ 5,190 May 3,520 $ 7,968 June 1,320 $ 3,960 July 3,420 $ 7,668 August 4.120 $ 8,780 September 1.610 $ 4,830 October $ 2,490 November 1,420 $ 4,260 December 2,320 $ 6,960 ok mt mnt 830 ences 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 $ $ 1.60 per occupancy day 430 per month

Answer 1

Variable cost of electricity 2.00 fixed cost of electricityl $ 540 per occupancy-day per month calculation: Variable cost of electricity = (cost at the high activity level - cost at the low activity leved): (High activity level-how activity level) $ 8,780 $1,620 4, 120 540 $7,160 + 3,580 occupancy days $2.00 per occupancy day fixed cost of electricity Total cost - Variable cost element $8,780-($2.00 per occupancy days X 4,120 occupancy days) $ 8,780 $ 8,240 $ 540