PROBLEM 4-6. Account Analysis, High-Low, Contribution Margin Information \'^p on

Question

PROBLEM 4-6. Account Analysis, High-Low, Contribution Margin Information '^p
on occupancy and costs at the New Light Hotel for April, May, and June are indicated
below:

                                                 April                May                 June
Occupancy                                 1,500              1,650                1,800
Day manager salary                   $ 4,200            $ 4,200             $ 4,200
Night manager salary                    3,700             3,700              3,700
Cleaning staff                             15,300             15,600             15,900
Depreciation                              12,000             12,000             12,000
Complimentary continental breakfast:
food and beverages                      4,600              5,300               5,800
Total                                        $39,800            $40,800           $41,600

Required
a. Calculate the fixed costs per month and the variable cost per occupied room using
account analysis for April.
b. Calculate the fixed costs per month and the variable cost per occupied room using
the high-low method.

Explanation / Answer

Using account analysis the variable costs are the cleaning staff and the breakfast so the variable costs for April are 19,900 and the fixed costs are 19,900 also. The variable cost per room is 19,900/1500= 13.267. Using hi low analysis, the variable cost is (41,600- 39,800)/(1800-1500)= 6.00. The fixed costs would be 41,600- 1800*6= 30,800.

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