Question
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 for one day. The hotels business is highly seasonal, with peaks occurring during the ski season and in the summer.
Month | Occupancy-Days | Electrical Costs | |||
January | 3,400 | $ | 9,536 | ||
February | 4,150 | $ | 10,180 | ||
March | 3,080 | $ | 9,184 | ||
April | 2,230 | $ | 7,136 | ||
May | 1,570 | $ | 5,024 | ||
June | 1,910 | $ | 6,112 | ||
July | 3,880 | $ | 9,997 | ||
August | 3,830 | $ | 9,904 | ||
September | 2,060 | $ | 6,592 | ||
October | 1,940 | $ | 6,208 | ||
November | 1,050 | $ | 3,360 | ||
December | 2,710 | $ | 8,168 | ||
Required:
1. Using the high-low method, estimate the fixed cost of electricity per month and the variable cost of electricity per occupancy-day.
2. What other factors in addition to occupancy-days are likely to affect the variation in electrical costs from month to month? (You may select more than one)
systematic factors like guests, switching off fan and lights
number of days present in a month
income taxes paid on hotel income
seasonal factors like winter and summer
fixed salary paid to hotel receptionist
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