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. Month Occupancy-Days Electrical Costs
January 2,830 $ 6,750
February 3,340 $ 7,410
March 3,650 $ 7,905
April 1,840 $ 5,520
May 750 $ 2,250
June 1,830 $ 5,490
July 3,890 $ 8,190
August 1,700 $ 5,100
September 4,060 $ 8,410
October 2,260 $ 6,780
November 1,350 $ 4,050
December 290 $ 870
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?
Answers: 3
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