ACCT 505 Solutions to Weekly Problems - Week 1

Exercise 2-4 (20 minutes)

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

per occupancy-day

Total cost (August)

8,111

Variable cost element

( 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...