The Cheyenne Hotel in Big Sky, Montana, has accumulated records of the total electrical costs of...

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The Cheyenne Hotel in Big Sky, Montana, has accumulated recordsof the total electrical costs of the hotel and the number ofoccupancy-days over the last year. An occupancy-day represents aroom rented 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
January 2,710 $ 5,270
February 3,600 $ 6,205
March 860 $ 2,150
April 2,170 $ 4,350
May 4,200 $ 7,160
June 1,530 $ 3,825
July 4,110 $ 7,050
August 4,060 $ 6,925
September 1,980 $ 4,090
October 1,160 $ 2,900
November 1,210 $ 3,025
December 2,480 $ 4,910
Required:
1. Using the high-low method, estimate the fixed cost ofelectricity per month and the variable cost of electricity peroccupancy-day. (Do not round your intermediatecalculations. Round your Variable cost answer to 2 decimal placesand Fixed cost element answer to nearest whole dollaramount.)

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3.9 Ratings (740 Votes)


Electrical Costs
	Occupancy-Days	Electrical Costs
High level of activity	4,200	$7,160
Low level of activity	860	$2,150
Change	3,340	$5,010
Variable cost per unit =$5,010 / 3,340 days =$1.50 per Occupancy-Days
Fixed cost element =$7,160 - (4,200*$1.50) =$860

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The Cheyenne Hotel in Big Sky, Montana, has accumulated recordsof the total electrical costs of the hotel and the number ofoccupancy-days over the last year. An occupancy-day represents aroom rented for one day. The hotel’s business is highly seasonal,with peaks occurring during the ski season and in the summer.MonthOccupancy-DaysElectrical CostsJanuary2,710$5,270February3,600$6,205March860$2,150April2,170$4,350May4,200$7,160June1,530$3,825July4,110$7,050August4,060$6,925September1,980$4,090October1,160$2,900November1,210$3,025December2,480$4,910Required:1. Using the high-low method, estimate the fixed cost ofelectricity per month and the variable cost of electricity peroccupancy-day. (Do not round your intermediatecalculations. Round your Variable cost answer to 2 decimal placesand Fixed cost element answer to nearest whole dollaramount.)

Month	Occupancy-Days	Electrical Costs
January	2,710	$	5,270
February	3,600	$	6,205
March	860	$	2,150
April	2,170	$	4,350
May	4,200	$	7,160
June	1,530	$	3,825
July	4,110	$	7,050
August	4,060	$	6,925
September	1,980	$	4,090
October	1,160	$	2,900
November	1,210	$	3,025
December	2,480	$	4,910