Month Occupancy-Days Electrical Costs January .... February. 1,736 1,904 2,356 $4,127 $4,207 $5,083 March... April.... May 960 $2,857 $1,871 $2,696 $4,670 $5,148 $2,691 $1,588 $2,454 $3,529 360 June.. 744 July .. August. September . 2,108 2,406 840 October... 124 November. 720 December.. 1,364
High-Low Method
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 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 in addition to occupancy-days are likely to affect the variation in electrical costs from month to month?
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