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PROBLEM SOLVING. Answer the following problems. Show your solutions and highlight your final answers. ...

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Accounting

PROBLEM SOLVING. Answer the following problems. Show your solutions and highlight your final answers.

Problem 1 (High-Low Method)

The Amano Hotel 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 Costs (pesos)

January

2,604

6,257

February

2,856

6,550

March

3,534

7,986

April

1,440

4,022

May

540

2,289

June

1,116

3,591

July

3,162

7,264

August

3,608

8,111

September

1,260

3,707

October

186

1,712

November

1,080

3,321

December

2,046

5,196

Required:

  1. Using the high-low method, estimate the fixed cost of electricity per month and the variable cost of electricity per occupancy-day. Round on the fixed cost to the nearest whole peso and the variable cost to the nearest whole centavo.
  2. What other factors other than occupancy-days are likely to affect the variation in electrical costs from month to month?

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