he Cheyenne Hotel in Big Sky Montana has accumulated records

he 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 January February March April May June July August September October November December Occupancy Days 3,230 3,100 4,170 2,110 1,100 950 3,190 2,080 4,200 1,060 1,670 2,830 Electrical Costs $10,194 $ 9,888 $12,266 7,807 $ 4,070 3,515 $10,046 $ 7,696 $12,290 $ 3,922 $ 6,179 $ 9,241 Required 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) Occupancy Electrical Days Costs High activity level Low activity level Change Variable cost per occupancy-day Fixed cost element 2. What other factors other than 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 answers and double click the box with the question mark to empty the box for a wrong answers.) Seasonal factors like winter or summer Income taxes paid on hotel income systematic factors like guests, switching off fans and lights Number of days present in a month

Solution

1.

2.

	Occupancy- Days	Electrical Cost
High activity level (September)	4,200	$            12,290
Low activity level (June)	950	$               3,515
Change	3,250	$               8,775
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Variable cost	= Change in cost ÷ Change in activity
	= $8775 ÷ 3,250 occupancy-days
	= $2.70 per occupancy-day
Total cost (September)	$                                                         12,290
Variable cost element
($2.70 per occupancy-day × 4200 occupancy-days)	$                                                         11,340
Fixed cost element	$                                                               950