Demo for Chapter 5 & 6

Demo for Chapter 5 & 6 - Chapters 5&6 DemoProblem1

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Demo Problem 1 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  off the fixed cost to the nearest whole dollar and the variable cost to  the nearest whole cent.   1
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2. What other factors other than occupancy-days are likely to affect the  variation in electrical costs from month to month?  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÷3,422occupancy-days        = $ 1.87per occupancy-day (Round to  the nearest cent.)     Total cost (August)  $ 8,111     Variable cost element ($ 1.87per  occupancy-day x 3,608 occupancy-days)  6,747          Fixed cost element  $ 1,364        2
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Problem 2 Haaki Shop, Inc., is a large retailer of water sports equipment. An income  statement for the company's surfboard department for a recent quarter is 
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This note was uploaded on 08/31/2010 for the course AEM 3230 taught by Professor Little,j.e. during the Spring '08 term at Cornell.

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Demo for Chapter 5 & 6 - Chapters 5&6 DemoProblem1

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