P6-68A Analyze cost behavior at a hospital using various cost estimation methods.

Sandy Dawson is the Chief Operating Officer at Mercy Hospital in Atlanta, Georgia. She is analyzing the hospitals overhead costs but is not sure whether nursing hours or the number of patient days would be the best cost driver to use for predicting the hospitals overhead. She has gathered the following information for the last six months of the most recent year:

Questions:

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.

Please answer both 7 and 8!