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. Month January February March April May June July August September October November December Occupancy-Days Electrical Costs 2,830 $ 6,750 3,340 $ 7,410 3,650 $ 7,905 1,840 $ 5,520 750 $ 2,250 1,830 $ 5,490 $ 8,190 1,700 $ 5,100 4,060 $ 8,410 2,260 $ 6,780 1,350 $ 4,050 290 $ 870 3,890

Answer 1

Variable Cost = Differece in cost / Difference in Days Fixed cost = Cost-(Days*Variable Cost) Cost Equation = Fixed Cost +Days * Varaible cost Per Day 8701 Estimate the costs with High-Low Method Occupancy Days Electicity Costs High level of Activity sept 4060 8410 low level of Activity Dec 290 Change 3770 7540 Answer Varaible cost 7540/3770 2.00 Per Occupancy Day Fixed Cost (8410-4060*2.00)) 290 Per Month Other Factors need to consider 1.Systamateic Factors like Guests, Switching off Fans and lights 2.Seasonal Factors like winter and Summer 3.Number of Days Present in a Month