Objective 4 - Separate mixed costs into their fixed and variable components using the high-low method, the scatterplot method, and the method of least squares. Deepa Dalal opened a free-standing radiology clinic. She had anticipated that the costs for the radiological tests would be primarily fixed, but she found that costs increased with the number of tests performed. Costs for this service over the past nine months are as follows: Month Radiology Tests Total Cost 2.800 $133,500 January February March April May June July August September 2,600 135,060 175.000 170,600 176,900 186,600 174,450 3,100 3,500 3,400 3,700 3,840 4,100 3,450 195,510 185.300 Required: 1. Prepare a scattergraph based on the preceding data. Use cost for the vertical axis and number of radiology tests for the horizontal axis. Based on an examination of the scattergraph, does there appear to be a linear relationship between the cost of radiology service and the number of tests? 2. Compute the cost formula for radiology services using the high-low method. 3. Calculate the predicted cost of radiology services for October for 3,500 tests using the formula f ound in Requirement 2.

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Objective 4 - Separate mixed costs into their fixed and variable components
using the high-low method, the scatterplot method, and the method of least
squares.
Deepa Dalal opened a free-standing radiology clinic. She had
anticipated that the costs for the radiological tests would be
primarily fixed, but she found that costs increased with the
number of tests performed. Costs for this service over the
past nine months are as follows:
Month
Radiology Tests
Total Cost
2.800
$133,500
January
February
March
April
May
June
July
August
September
2,600
135,060
175.000
170,600
176,900
186,600
174,450
3,100
3,500
3,400
3,700
3,840
4,100
3,450
195,510
185.300
Required:
1. Prepare a scattergraph based on the preceding data. Use cost for the vertical
axis and number of radiology tests for the horizontal axis. Based on an
examination of the scattergraph, does there appear to be a linear relationship
between the cost of radiology service and the number of tests?
2. Compute the cost formula for radiology services using the high-low method.
3. Calculate the predicted cost of radiology services for October for 3,500 tests
using the formula f
ound in Requirement 2.
Transcribed Image Text:Objective 4 - Separate mixed costs into their fixed and variable components using the high-low method, the scatterplot method, and the method of least squares. Deepa Dalal opened a free-standing radiology clinic. She had anticipated that the costs for the radiological tests would be primarily fixed, but she found that costs increased with the number of tests performed. Costs for this service over the past nine months are as follows: Month Radiology Tests Total Cost 2.800 $133,500 January February March April May June July August September 2,600 135,060 175.000 170,600 176,900 186,600 174,450 3,100 3,500 3,400 3,700 3,840 4,100 3,450 195,510 185.300 Required: 1. Prepare a scattergraph based on the preceding data. Use cost for the vertical axis and number of radiology tests for the horizontal axis. Based on an examination of the scattergraph, does there appear to be a linear relationship between the cost of radiology service and the number of tests? 2. Compute the cost formula for radiology services using the high-low method. 3. Calculate the predicted cost of radiology services for October for 3,500 tests using the formula f ound in Requirement 2.
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