Analyze cost behavior at a hospital using various cost estimation methods (Learning Objectives 1, 2, 3, 4, & 5)
Sandy Dawson is the Chief Operating Officer at Mercy Hospital in Atlanta, Georgia. She is analyzing the hospital’s
Requirements
- 1. Are the hospital’s overhead costs fixed, variable, or mixed? Explain.
- 2. Graph the hospital’s overhead costs against nursing hours. Use Excel or graph by hand.
- 3. Graph the hospital’s overhead costs against the number of patient days. Use Excel or graph by hand.
- 4. Do the data appear to be sound, or do you see any potential data problems? Explain.
- 5. Use the high-low method to determine the hospital’s cost equation using nursing hours as the cost driver. Predict total overhead costs if 25,500 nursing hours are predicted for the month.
- 6. Dawson runs a regression analysis using nursing hours as the cost driver to predict total hospital overhead costs. The Excel output from the regression analysis is as follows:
If 25,500 nursing hours are predicted for the month, what is the total predicted hospital overhead?
- 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.
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Chapter 6 Solutions
Managerial Accounting, Student Value Edition (5th Edition)
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