Question

HAS TO BE SOLVED IN EXCEL

Exercise 5A–1 High-Low Method LO5–11 NEEDS to be solved and shown in excel 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: 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. What other factors in addition to occupancy-days are likely to affect the variation in electrical costs from month to month

Answer 1

Electrical Costs
	Occupancy Days	Electrical Costs
High level of activity	2,406	$5,148
Low level of activity	124	$1,588
Change	2,282	$3,560
Variable cost per per occupancy days =$3,560 / 2,282 =$1.56 per Occupancy Days
Fixed cost element =$5,148 - (2406*$1.56) =$1,395