Objective 4 - Separate mixed costs into their fixed and variable components using the high-low method, the scatterplot method, and the method of least squares. Deepa Dalal opened a free-standing radiology clinic. She had anticipated that the costs for the radiological tests would be primarily fixed, but she found that costs increased with the number of tests performed. Costs for this service over the past nine months are as follows: Month Radiology Tests Total Cost 2.800 $133,500 January February March April May June July August September 2,600 135,060 175.000 170,600 176,900 186,600 174,450 3,100 3,500 3,400 3,700 3,840 4,100 3,450 195,510 185.300 Required: 1. Prepare a scattergraph based on the preceding data. Use cost for the vertical axis and number of radiology tests for the horizontal axis. Based on an examination of the scattergraph, does there appear to be a linear relationship between the cost of radiology service and the number of tests? 2. Compute the cost formula for radiology services using the high-low method. 3. Calculate the predicted cost of radiology services for October for 3,500 tests using the formula f ound in Requirement 2.

Objective 4 - Separate mixed costs into their fixed and variable components using the high-low method, the scatterplot method, and the method of least squares. Deepa Dalal opened a free-standing radiology clinic. She had anticipated that the costs for the radiological tests would be primarily fixed, but she found that costs increased with the number of tests performed. Costs for this service over the past nine months are as follows: Month Radiology Tests Total Cost 2.800 $133,500 January February March April May June July August September 2,600 135,060 175.000 170,600 176,900 186,600 174,450 3,100 3,500 3,400 3,700 3,840 4,100 3,450 195,510 185.300 Required: 1. Prepare a scattergraph based on the preceding data. Use cost for the vertical axis and number of radiology tests for the horizontal axis. Based on an examination of the scattergraph, does there appear to be a linear relationship between the cost of radiology service and the number of tests? 2. Compute the cost formula for radiology services using the high-low method. 3. Calculate the predicted cost of radiology services for October for 3,500 tests using the formula f ound in Requirement 2.

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Description: Objective 4 - Separate mixed costs into their fixed and variable componentsusing the high-low method, the scatterplot method, and the method of leastsquares.Deepa Dalal opened a free-standing radiology clinic. She hadanticipated that the costs for t

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter3: Cost Behavior

Section: Chapter Questions

Problem 17E: Deepa Dalal opened a free-standing radiology clinic. She had anticipated that the costs for the...

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