Case 8-1 (Static) The High-Low Method and Regression Analysis The Brenham General Hospital was approached by Health Food, Incorporated (HFI) which specializes in the preparation of meals for institutional patients. HFI stated that it would prepare all inpatient meals to provider specifications and deliver them on time for $11.50 per day per patient. The hospital was facing a steady decline in bed occupancy and was determined to hold the line on costs wherever possible.Hospital management did not have a clear idea what the present system of providing meals to patients was costing. Hospital staff gathered the information below, which covered expenses for the dietary department for the past year. 

The hospital has 120 beds. It is open year-round and has a 33% percent occupancy rate.It was determined that the dietitian provided valuable counseling and advising services. Should the hospital eliminate in house meal preparation, it would want to retain her services. Also, the administration wanted to keep and maintain the kitchen and equipment.References

Required:

1. Using the high-low method and regression analysis, determine the variable(b) and fixed costs(a) of the in-house meal service assuming the cost driver is patient days.

2. Which cost estimation method would you choose and why? HINT: Compare the sum of squared errors between the H-L Method and Regression Analysis output.

3. Should the hospital administration accept the offer of the outside company? Why or why not?