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 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:
a. Using the high-low method, estimate the fixed cost of electricity per month and the variable cost of electricity per occupancy-day.
b. What other factors other than occupancy-days are likely to affect the variation in electrical costs from month to month?

Total cost= 1,395 + 1.56x

x= number of units of activity

Explanation:

To calculate the unitary and fixed costs, we need to use the following formulas:

Variable cost per unit= (Highest activity cost - Lowest activity cost)/ (Highest activity units - Lowest activity units)

Variable cost per unit= (5,148 - 1,588) / (2,406 - 124)

Variable cost per unit= $1.56

Fixed costs= Highest activity cost - (Variable cost per unit * HAU)

Fixed costs= 5,148 - (1.56*2,406)

Fixed costs= $1,395

Fixed costs= LAC - (Variable cost per unit* LAU)

Fixed costs= 1,588 - (1.56*124)

Fixed costs= $1,395

The total cost is given by:

Total cost= 1,395 + 1.56x

x= number of units of activity

The electrical costs can vary with the season. In summer a higher electricity use is required to cool down the rooms and, some artifacts such as freezers and refrigerators usage increase. In winter the days are shorter, artificial lighting increases.

the answer should be demonstrations i hope this

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