Reference no: EM132574964

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                     Occupancy-Days                  Electrical Costs

January                    3,000                                  $15,000

February                    850                                     $4,250

March                          4,430                                 $18,570

April                               1,470                                $7,350

May                                   3,650                            $18,250

June                                     1,120                           $5,600

July                                       3,910                            $17,425

August                                     3,840                             $17,288

September                              1,900                          $9,500

October                                     1,090                         $5,450

November                                   2,040                            $10,200

December                                     2,990                          $14,950

Required:

Question 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.)

Question 2. What other factors in addition to occupancy-days are likely to affect the variation in electrical costs from month to month? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)

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

unanswered

• Number of days present in a month.

unanswered

• Income taxes paid on hotel income.

unanswered

• Seasonal factors like winter or summer.

unanswered

• Fixed salary paid to hotel receptionist.