The Cheyenne Hotel in Big Sky, Montana has accumulated records of the total elec
ID: 2387678 • Letter: T
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 out 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 Cost
Jan. 1,736 4,127
Feb.1,904 4,207
Mar.2,356 5,083
Apr.960 2,857
May 360 1,871
Jun. 7442,696
Jul. 2,108 4,670
Aug.2,406 5,148
Sep. 840 2,691
Oct. 1241,588
Nov.720 2,454
Dec. 1,364 3,529
1. Using the high low method, estimate the fixed cost of electricity per month and the variable 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.
2. What other factors other than occupancy days are likely to affect the variation in electrical costs from month to month?
Explanation / Answer
Hi-Low Find the high and low for both the costs and units and subtract Costs: 5,148 - 1588 = 3560 Units: 406 - 124 = 282 VC per unit: 3560 / 282 = 12.62 Fixed Costs: VC would be 12.62 x 124 = 1,565 so fixed costs would be 1588 - 1565 = 23 Part 2 A true, some will use lights more than others B false, july has 3 more days than Feb and probably would use more electricity C true - AC in the summer is usually more than in Oct, Nov. same for heat Source(s): i am an accounting geek 2 years ago