Please explain and solve: The Cheyenne Hotel in Big Sky, Montana, has accumulate

ID: 2340158 • Letter: P

Question

Please explain and solve:

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 out for one day. The hoters business is highly seasonal, with peaks occurring during the ski season and In the summen Occupancy Electrical Days 2,640 2,850 950 2,420 2,090 4,470 4,020 3,940 1,630 1,090 1,390 2910 January February March April May 5 13,200 5 14,300 5 4,900 5 12,100 S 10,450 S 18,860 S17,160 S 16,760 S 8,150 S 5,450 S 6,950 14,550 July August September 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) Days Costs High activity level Low activity level Change Variable cost per occupancy-day Fixed cost element

Explanation / Answer

Answer

High-Low Method

In March, Days are least and in June month, days are maximum

Days

Cost

High Level Activity

4,470

18,860.00

Low Level Activity

980

4,900.00

Change

3,490

13,960.00

Variable Cost per unit = Difference in cost / difference in Days

= $13,960 / 3,490

Variable Cost per unit = $4 per day

At 4,470 Days

Fixed cost = Total cost – Variable cost

= $18,860 – (4,470 Days * $4 per day)

Fixed cost = $980

Dear Student, if u have any doubt, plz feel free to reach me