High-Low Method [LO4]

The Edelweiss Hotel in Vail, Colorado, 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.

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?

Transcribed Image Text:

Occupancy- Electrical Month Days Costs January. 2,604 $6,257 February... 2,856 $6,550 March. 3,534 $7,986 April... 1,440 $4,022 May.. 540 $2,289 June. 1,116 $3,591 July.... 3,162 $7,264 August 3,608 $8,111 September ...... 1,260 $3,707 October 186 $1,712 November 1,080 $3,321 December 2,046 $5,196