E6-52B Performing a regression analysis to predict overhead for a hospital laboratory (Learning Objective 5)

The manager of the main laboratory facility at MetroFit Center (from E6-49B) collects seven additional months of data after obtaining the regression results in the prior period.

The number of tests performed and the total monthly overhead costs for the lab follows:

Month Number of Lab Tests Performed Total Laboratory Overhead Costs August 3,050 $22,300 September 2,800 $22,100 October 3,600 $25,100 November 3,800 $26,700 December 4,200 $27,300 January 2,200 $20,300 February 3,950 $28,500 Use Excel to perform the requirements.

Requirements 1. Run a regression analysis.

2. Determine the lab’s cost equation (use the output from the regression analysis you perform using Excel).

3. Determine the R-square using the Excel output you obtain. What does the lab’s R-square indicate?

4. Predict the lab’s total overhead costs for the month if 3,000 tests are performed.

E6-53B Determine cost behavior and predict operating costs

(Learning Objective 2)

Bayview Apartments is a 750-unit apartment complex. When the apartments are 90% occupied, monthly operating costs total $217,150. When occupancy dips to 80%, monthly operating costs fall to $212,800. The owner of the apartment complex is worried because many of the apartment residents work at a nearby manufacturing plant that has just announced it will close in three months. The apartment owner fears that occupancy of her apartments will drop to 70% if residents lose their jobs and move away. Assuming the same relevant range, what should the owner expect operating costs to be if occupancy falls to 70%?