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EXERCISE 5-3 High-Low Method [LO3] The Edelweiss Hotel in Vail, Colorado, has accumulated records of the total electrical costs of the hotel and the number
EXERCISE 5-3 High-Low Method [LO3] 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. 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 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 vari- able 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? FETIYE AYDIN UNSAL-MANAGERIAL ACCOUNTING/ RAY H. GARRISON, ERIC W. NOREEN, PETER C. BREWER.-12TH ED
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