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. Occupancy-Days Electrical Costs Month January 3,400 February 3,280 $ 10,234 $ 10,052 March 4,370 $11,605 April 1,950 $6,825 May 680 $2,380 June 1,960 $6,860 July 4,040 $11,060 August 4,080 $ 11,100 September 2,240 $7,602 October 1,030 $3,605 November 1,460 $4,634 December 2,700 $8,974 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 intermediate calculations. Round Variable cost to 2 decimal places and Fixed cost element to nearest dollar) High activity level Occupancy days Electrical cost Low activity level Change Variable cost Fixed cost 2. What other factors other than occupancy-days are likely to affect the variation in electrical costs from month to month? (There can be more than one answer) a) Systematic factors like guests switching off fans and lights. b) Number of days present in a month. c) Income taxes paid on hotel income. d) Seasonal factors like winter or summer.
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. Occupancy-Days Electrical Costs Month January 3,400 February 3,280 $ 10,234 $ 10,052 March 4,370 $11,605 April 1,950 $6,825 May 680 $2,380 June 1,960 $6,860 July 4,040 $11,060 August 4,080 $ 11,100 September 2,240 $7,602 October 1,030 $3,605 November 1,460 $4,634 December 2,700 $8,974 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 intermediate calculations. Round Variable cost to 2 decimal places and Fixed cost element to nearest dollar) High activity level Occupancy days Electrical cost Low activity level Change Variable cost Fixed cost 2. What other factors other than occupancy-days are likely to affect the variation in electrical costs from month to month? (There can be more than one answer) a) Systematic factors like guests switching off fans and lights. b) Number of days present in a month. c) Income taxes paid on hotel income. d) Seasonal factors like winter or summer.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text: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.
Occupancy-Days Electrical Costs
Month
January
3,400
February
3,280
$ 10,234
$ 10,052
March
4,370
$11,605
April
1,950
$6,825
May
680
$2,380
June
1,960
$6,860
July
4,040
$11,060
August
4,080
$ 11,100
September 2,240
$7,602
October 1,030
$3,605
November 1,460
$4,634
December 2,700
$8,974
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 intermediate calculations. Round Variable cost to 2 decimal places and Fixed cost
element to nearest dollar)
High activity level
Occupancy days Electrical cost
Low activity level
Change
Variable cost
Fixed cost
2. What other factors other than occupancy-days are likely to affect the variation in electrical costs
from month to month? (There can be more than one answer)
a) Systematic factors like guests switching off fans and lights.
b) Number of days present in a month.
c) Income taxes paid on hotel income.
d) Seasonal factors like winter or summer.
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