Chapter 5.A, Problem 1E

EXERCISE 5A-1 High-Low Method LO5-10
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.

Required:

1. Using the high-low method, estimate the feed cost of electricity per month and the variable cost of electricity per occupancy-day. Round off the feed cost to the nearest whole dollar and the variable cost to the nearest whole cent.
2. What other factors in addition to occupancy-days are likely to affect the variation in electrical costs from month to month?