Sandy Dawson is the Chief Operating Officer at Mercy Hospital in Atlanta, Georgia. She is analyzing the
Question:
Requirements
1. Are the hospital's overhead costs fixed, variable, or mixed? Explain.
2. Graph the hospital's overhead costs against nursing hours. Use Excel or graph by hand.
3. Graph the hospital's overhead costs against the number of patient days. Use Excel or graph by hand.
4. Do the data appear to be sound, or do you see any potential data problems? Explain.
5. Use the high-low method to determine the hospital's cost equation using nursing hours as the cost driver. Predict total overhead costs if 25,500 nursing hours are predicted for the month.
6. Dawson runs a regression analysis using nursing hours as the cost driver to predict total hospital overhead costs. The Excel output from the regression analysis is as follows:
If 25,500 nursing hours are predicted for the month, what is the total predicted hospital overhead?
7. Dawson then ran the regression analysis using number of patient days as the cost driver. The Excel output from the regression is shown here:
If 3,680 patient days are predicted for the month, what is the total predicted hospital overhead?
8. Which regression analysis (using nursing hours or using number of patient days as the cost driver) produces the best cost equation? Explain your answer
Step by Step Answer: