The Cheyenne Hotel in Big Sky, Montana, has accumulated records of the total ele
ID: 2574329 • 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 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 3,000 850 4,430 1,470 3,650 1,120 3,910 3,840 1,900 1,090 2,040 2,990 $15,000 $ 4,250 $18,570 7,350 $18,250 $ 5,600 $17,425 $17,288 $ 9,500 $ 5,450 $10,200 $14,950 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.)Explanation / Answer
Variable cost = (18570-4250)/(4430-850)= 4 per occupancy day Fixed cost = 18570-(4430*4)= 850 per month 2 Seasonal factor like summer or winter and systemetic factors like guests, swithcing off fans and lights affect electrical costs