equirements: . Using the high-low method, and based upon the data collected: (a) estimate the variable cost per admission. (b) estimate the fixed costs for admission. (c) estimate the cost formula for admissions (cost formula is in the format of Y = a + bx).
equirements: . Using the high-low method, and based upon the data collected: (a) estimate the variable cost per admission. (b) estimate the fixed costs for admission. (c) estimate the cost formula for admissions (cost formula is in the format of Y = a + bx).
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Complete questions with proper format and details.
Transcribed Image Text:The data below have been taken from the cost records of the Halifax General Hospital. The data relate
to the costs of admitting patients at various levels of patient activity:
Month
1.
2.
3.
May..
June
4.
July..
August
September..
October.......
November.
December.
Requirements:
Using the high-low method, and based upon the data collected:
(a) estimate the variable cost per admission.
(b) estimate the fixed costs for admission.
(c) estimate the cost formula for admissions (cost formula is in the format of Y = a + bx).
Using the cost formula you derived above, what admission costs would you expect to be incurred
during a month in which there are 2,750 hospital admissions?
Prepare a scattergraph plot using the data. Plot cost on the vertical axis and activity on the
horizontal axis. Add the visual best-fit "trendline" to fit a line through the points on your
scattergraph. Also add the "high-low trendline" so that you can compare the two trendlines and
the data set points in Requirement 4. (Hint: You can either use software, such as Microsoft Excel,
or Google Sheets, or draw the scattergraph plot on your computer using a drawing program
(Microsoft Paint, or similar) or you can draw and plot the points on a piece of paper by hand and
take a picture and insert the picture into your document.)
Scrutinize the points on your scattergraph, and explain why the high-low method would or would
not yield an accurate cost formula in this situation.
Number of Patients
Admitted
3,600
3,800
2,900
3,200
3,300
2,600
2,200
3,500
Admitting
Department Costs
$ 29,400
$ 28,700
$ 27,400
$ 28,000
$ 28,600
$ 26,200
$ 25,600
$ 29,300
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