The High-Low Method and Regression Analysis The Brenham General Hospital was approached by Health Food, Inc. (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. Brenham General Hospital Other Staff Patient Days Dietician Food Costs Maintenance Patient Equipment January February $ 2,875 $ 3,122 $ 9,674 $ 1,401 $ 1,649 $ 1,382 2,875 2,908 9,184 1,322 1,415 1,312 March 2,875 2,655 8,302 1,322 1,313 1,186 April 2,875 2,600 7,084 1,288 1,105 1,012 May 2,875 2,433 6,398 1,200 1,089 914 June 2,875 2,083 4,338 1,133 1,011 604 July 2,875 1,809 3,612 1,093 900 516 August 2,875 2,322 6,275 1,122 1,112 896 September 2,875 1,434 6,734 1,235 1,103 962 October 2,875 2,700 9,002 1,302 1,300 1,286 November 2,875 2,798 8,456 1,300 1,442 1,208 December 2,875 2,600 7,798 1,322 1,396 1,114 $ 34,500 $ 29,464 $ 86,857 $ 15,040 $ 14,835 $ 12,392 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. Answer is complete but not entirely correct. High-low method Regression analysis Variable Fixed Cost Cost $ 9.74 $ 5,250 EA $ 9.35 $ 5,401 2. Which cost estimation method would you choose and why? 3. Should the hospital administration accept the offer of the outside company? Why or why not?