BRIEF EXERCISE 6-2 Applying the High-Low Method [LO2-CC9] The Royal Canadian Lodge in Banff, Alberta, 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 January February Occupancy-Days 1,736 1,407 March 2.555 April 960 May Electrical Costs $4.127 3.207 5,210 2.857 2.871 2,696 4,670 3.148 1,391 1,490 630 744 2,108 June 1.406 July August September October November December 480 230 720 2.454 1,364 3,529 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 the fixed cost to the nearest whole dollar and the variable cost to the nearest whole cent. 2. What factors other than occupancy-days are likely to affect the monthly variation in electrical costs? BRIEF EXERCISE 6-5 Understanding Cost Behaviour and Contribution Margin [LO1 CC1, 3; L03 CC12] Murugan Ltd. had the following results for the year: Sales $45,000 Less: Operating expenses 39,000 Net operating income $6.000 The average selling price for the units sold was $15 per unit and average variable cost 89 per unit. Required: Prepare a contribution margin income statement