The Cheyenne Hotel in Big Sky, Montana, has accumulated records of the total electrical costs of the
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 out 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 ... | 1,736 | $ 4,127 |
February ... | 1,904 | $ 4,207 |
March ... | 2,356 | $ 5,083 |
April ... | 960 | $ 2,857 |
May ... | 360 | $ 1,871 |
June ... | 744 | $ 2,696 |
July ... | 2,108 | $ 4,670 |
August ... | 2,406 | $ 5,148 |
September ... | 840 | $ 2,691 |
October ... | 124 | $ 1,588 |
November ... | 720 | $ 2,454 |
December ... | 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 off the fixed cost to the nearest whole dollar and the variable cost to the nearest whole cent.
2. What other factors other than occupancy-days are likely to affect the variation in electrical costs from month to month?
Managerial Accounting
ISBN: 978-0697789938
13th Edition
Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer