The Cheyenne Hotel in Big Sky, Montana, has accumulated records of the total electrical costs of the hoteland the number of occupancy-days over the last year. An occupancy-day represents a room rented out for oneday. The hotel’s business is highly seasonal, with peaks occurring during the ski season and in the summer.Month Occupancy-Days Electrical CostsJanuary ..................... 1,736 $4,127February .................... 1,904 $4,207March ........................ 2,356 $5,083April ........................... 960 $2,857May ........................... 360 $1,871June .......................... 744 $2,696July ............................ 2,108 $4,670August ....................... 2,406 $5,148September ................ 840 $2,691October ..................... 124 $1,588November ................. 720 $2,454December ................. 1,364 $3,529Required:1. Using the high-low method, estimate the fixed cost of electricity per month and the variable cost ofelectricity per occupancy-day. Round off the fixed cost to the nearest whole dollar and the variablecost to the nearest whole cent.2. What other factors other than occupancy-days are likely to affect the variation in electrical costs frommonth to month?
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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 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 ..................... 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:
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 variable
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?
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