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# High-Low Method Predicting Cost The number of X-rays taken and X-ray costs over the last nine months in Beverly Hospital are given below Month X-Rays Taken X-Ray Costs January

High-Low Method; Predicting Cost

The number of X-rays taken and X-ray costs over the last nine months in Beverly Hospital are given below:

 Month X-Rays Taken X-Ray Costs January  . . . . . . . . . . . 6,250 \$28,000 February . . . . . . . . . . . 7,000 \$29,000 March . . . . . . . . . . . . . . 5,000 \$23,000 April . . . . . . . . . . . . . . 4,250 \$20,000 May . . . . . . . . . . . . . . . 4,500 \$22,000 June . . . . . . . . . . . . . . 3,000 \$17,000 July . . . . . . . . . . . . . . . . 3,750 \$18,000 August . . . . . . . . . . . . 5,500 \$24,000 September . . . . . . . . . 5,750 \$26,000

Required:

1.       Using the high-low method, estimate the cost formula for X-ray costs.

2.       Using the cost formula you derived above, what X-ray costs would you expect to be incurred during a month in which 4,600 X-rays are taken?

3.       Prepare a scattergraph using the data given above. Plot X-ray costs on the vertical axis and the number of X-rays taken on the horizontal axis. Draw a straight line through the two data points that correspond to the high and low levels of activity. Make sure your line intersects the Y-axis.

4.       Comment on the accuracy of your high-low estimates assuming a least-squares regression analysis estimated the total fixed costs to be \$6,529.41 per month and the variable cost to be

\$3.29 per X-ray taken. How would the straight line that you drew in requirement 3 differ from a straight line that minimizes the sum of the squared errors?

5.       Using the least-squares regression estimates given in requirement 4, what X-ray costs would you expect to be incurred during a month in which 4,600 X-rays are taken?

Jun 28 2020 View more View Less