Question

EXERCISE 5A-1 High-Low Method LOS-0 The Cheyenne Hotel in Big Sky. Montana, has accuranlated 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 busness is highly seasonal, with peaks occurring during the ski season and in the summer Occupancy-Days Electrical Costs Month January March. 1,736 ,904 2,356 960 360 744 2,108 2,406 840 124 720 1,364 $4,127 $4,207 $5,083 $2,857 $1,871 $2,696 $4,670 $5,148 $2,691 $1,588 $2,454 $3,529 April.. July September December... Required: 1. Using the high-low method, estimate the fixed cost of electricity per month and the variabile cost of electricity per occupancy-day. Round off the fixed cost to the nearest whole dollar and the variable cost to the nearest whole cent. What other factors in addition to occupancy-days are likely to affect the variation in electrical costs from month to month? 2.

Answer 1

Solution: Over here 'X' is occupany days & Y is Electrical cost We have at highest activity x2 2406 5148 at lowest activity 124 Formula Variable Cost of occupancy per day -y2-y1/ x2-x1 -5148-1588 /2406-124 -3560 /2282 1.56 Total Fixed Cost of electricity per month- 5148 - (1.56 2406) 5148 3753 - $1395

NI C) Ps 2 Solution Electrical cost may vary depending on seasons and guests (some are energy efficient, some are not). The number of days will also affect electrical cost (in respects to occupancy days).