Question

Parte VI:    HIGH LOW METHOD PROBLEM ( projected costs ) ( 20 pts)

The Best Cinema has accumulated records of the total utilities costs of the movies and number of clients – movies over the last year. An client-day represents a movie viewed out for one day. The Cinema’s business is highly seasonal, with peaks occurring during the summer season and fall .

Month - 2016	Client - movies	Utilities costs
Jan	2,604	$ 6,257
Feb	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
Aug	3,608	8,111
Sep	1,260	3,707
Oct	486	1,912
Nov	1,080	3,321
Dec	2,046	5,196

REQUIRED

Using the HIGH-LOW METHOD, estimate the FIXED COSTS of electricity per month and the VARIABLE COST of electricity per occupancy-day.

Using the cost formula and projected the utilities costs for the followings seven months: year 2017    

Month - 2017	Client days	Utilities costs
Jan 2017	3,500	$
Feb	4,050
March	4,800
April	2,580
April	2,500
May	890
June	1825
July	4,800

Answer 1

			Number of	Utilities
			Clients	Cost
High activity-Aug			3608	8111
Low Activity-Oct			486	1912
Change			3122	6199
Variable cost per client days = Change in cost / Change in client days
			6199/ 3122 = 1.986 per client day
Fixed cost per month:
Total cost			8111
Less: variable cost (3608*1.986)			7165
Fixed cost per month:			946
Statement of Utilities cost projected
Month-2017		Client days	Utilities cost
Jann -2017		3500	7897
Feb		4050	8989.3
March		4800	10478.8
April		2580	6069.88
April		2500	5911
May		890	2713.54
June		1825	4570.45
July		4800	10478.8