The Edelweiss Hotel in Vail, Colorado, has accumulated records of the total electrical costs of the

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.

Month	Occupancy- Days	Electrical 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 the "Variable cost per occupancy-day" to 2 decimal places and the "Fixed cost" to the nearest dollar amount. Omit the "$" sign in your response.)

Fixed cost	$	per month
Variable cost	$	per occupancy-day

2.	What other factors other than occupancy-days are likely to affect the variation in electrical costs from month to month? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.)
	Seasonal factors like winter or summer. Systematic factors like guests, switching off fans and lights. Number of days present in a month. Fixed salary paid to hotel receptionist. Income taxes paid on hotel income.

Explanation:

1.

	Occupancy- Days		Electrical Costs
High activity level (August)	3,608		$	8,111
Low activity level (October)	186			1,712
Change	3,422		$	6,399

Variable cost	= Change in cost ÷ Change in activity
	= $6,399 ÷ 3,422 occupancy-days
	= $1.87 per occupancy-day

Total cost (August)	$ 8,111
Variable cost element      ($1.87 per occupancy-day × 3,608 occupancy-days)	6,747
Fixed cost element	$ 1,364

2.

Electrical costs may reflect seasonal factors other than just the variation in occupancy days. For example, common areas such as the reception area must be lighted for longer periods during the winter. This will result in seasonal effects on the fixed electrical costs.

Additionally, fixed costs will be affected by how many days are in a month. In other words, costs like the costs of lighting common areas are variable with respect to the number of days in the month, but are fixed with respect to how many rooms are occupied during the month.

Other, less systematic, factors may also affect electrical costs such as the frugality of individual guests. Some guests will turn off lights when they leave a room. Others will not.