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

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 hoter's business is hightly seasonal with peaks occurring during the ski season and in the summer costs 2,920 3,780 2,164 65e 6,528 6,261 7,392 s 5,565 1,820 5,261 7,829 s 7,896 February April 2,ese 4,e0 uly August September october 570 $ 1,1% 2,680 5,900 Required: 1. Using the high-jow method, estimate the fixed cost of electricity per month and the variable cost of electricity per occupancy-dey (Do not round your Intermediate celculetions. Round your Varlable cost enswer to 2 declmel places and Pixed cost element answer to nearest whole doller emount Variable cost of electricity Fixed cost of electricity 2 What other factors in addition to occupancy-days are ikely to select more than one answer. Single click the box with the question m double click the box with the question mark to, empty the box for a wrong answer Amy boxes ieft with e question mark electncal costs from monith to month? (you may ark to produce a check mark for correct answer and affect the vaniation in eutomatically greded es incorrect Sytematic fectors lke guests witlching of ans and ighe Number of days present in armonth comtaves paid on oteincome D Sessonal factors like winter or summer Fixed salary paid to hotel receptionis Pe 1of4 Type here to search

Explanation / Answer

Solution 1:

Electricity cost at high level of activity (4070 days) = $7,896

Electricity cost at low level of activity (570 days) = $1,596

Variable cost of electricity using high low method = (Cost at high level - Cost at low level) / (high level activity - low level activity)

= ($7,896 - $1,596) / (4070 - 570) = $1.80 per occupancy day

Fixed cost of electrivity = $7,896 - (4070 * $1.80) = $570 per month

Solution 2:

Other factors that affect the variation in electricity cost from month to month are:

1. Systematic factors like guests, switching off fans and lights

2. Number of days present in a month

3. Seasonal factors like winter or summer

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