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Chapter 5

# Chapter 5 - Exercise 5-3 1 High activity level(August Low...

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Exercise 5-3   1. Month 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.

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Chapter 5 - Exercise 5-3 1 High activity level(August Low...

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