Case 9.1: ABC Clinic Key concept: Estimating fixed and variable costs via simple regression A BC Clinic provides a variety of basic medical services in a shopping mall location. It has extended hours on evenings and weekends, which make it a convenient A place to receive basic medical care. Susanna Shuman, clinic manager, has been analyzing the clinic's financial data to: try to figure out how she might improve the clinic's profitability. During the first year of its operation, the clinic, on average, charged a little over $100 per visit and was barely profitable. Susanna obtained the following monthly costs and patient numbers for Year 1: Month Patients Total Cost January 1 100 $10,000 February 2 105 $11,000 March 3 110 $10,500 April 4 112 $11,500 May 5 110 $11,000 June 6 114 $11,500 July 7 120 $13,000 August 8 121 $12,500 September 9 115 $12,000 October 10 131 $12,500 November 11 125 $12,000 December 12 126 $12,500 Totals for year 1,389 $140,000 Questions 1. What is the best regression estimate of fixed and variable costs for ABC Clinic 2. What are the total variable costs for Year 1 per the regression equation? 3. What are the total fixed costs for Year 1 per the regression equation? 4. What would be a reasonable estimate of total cost for January of Year 2? 5. With only a 5 percent risk of being wrong, would you accept without investiga- tion a January of Year 2 actual cost figure of $13,950?