Question

Check my work 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. Month January February March April May June July August September October November December Occupancy-Days Electrical Costs 2,710 $ 5,270 3,600 $ 6, 205 860 $ 2,150 2,170 $ 4,350 4,200 $ 7,160 1,530 $ 3,825 4,110 $ 7,050 4,060 $ 6,925 1,980 $ 4,090 1,160 $ 2,900 1,210 $ 3,025 2,480 $ 4,910

Answer 1

If it is helpful, please rate the answer and if any doubt arises let me know

1	Variable cost of electricity	=	$       1.50	per - occupancy day
	Fixed cost of electricity	=	$        860	per month
2	Systematic factors like guests, switching off fans and lights
	Seasonal factors like winter or summer
	Workings:
			Month	Days	Cost
	High Activity	=	May	4,200	$    7,160
	Low Activity	=	March	860	$    2,150
	Difference	=		3,340	$    5,010
	Variable cost	=	Difference in total cost / Difference in activity
		=	($5010) / (3340)
		=	$       1.50	per - occupancy day
	Fixed Cost	=	Total cost - Variable cost
		=	$7160 - ($1.50 X 4200)
		=	$        860	per month
	or	=	$2150 - ($1.50 X 860)
		=	$        860	per month