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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

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 out 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 ...

1,736

$ 4,127

February ...

1,904

$ 4,207

March ...

2,356

$ 5,083

April ...

960

$ 2,857

May ...

360

$ 1,871

June ...

744

$ 2,696

July ...

2,108

$ 4,670

August ...

2,406

$ 5,148

September ...

840

$ 2,691

October ...

124

$ 1,588

November ...

720

$ 2,454

December ...

1,364

$ 3,529


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?

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