Question

Need help with 1A 1B 1C

BUS2102-Spring 2019-Chapter 3 Fun & Exciting Exercises Always show your work when doing fun &exciting exercises! Box or circle final answers! Question 1) Apollo Hospital specializes in outpatient surgeries for relatively minor procedures. Apollo is a nonprofit institution and places great emphasis on controlling costs in order to provide services to the community in an efficient manner Apollo's CFO, Julie Chen, has been concerned of late about the hospital's consumption of medical supplies. To better understand the behavior of this cost, Julie consults with Rhett Bratt, the person responsible for Apollo's cost system. After some discussion, Julie and Rhett conclude that there are two potential cost drivers for the hospital's medical supplies costs. The first driver is the total number of procedures performed. The second is the number of patient-hours generated by Apollo. Julie and Rhett view the latter as a potentially better cost driver because the hospital does perform a variety of procedures, some more complex than others Rhett provides the following data relating to the past year to Julie. Hone Insert e Page Layout FormulasDate Review Month Medical Supplies costs Number of procedures Number of 106,000 230.000 84.000 238.000 193.000 80.000 210.000 92.000 222.000 $3,000 2,000 3.900 1,900 4.100 3.400 3.700 3.100 1.200 3.000 1.300 2,800 3.800 320 500 520 240 340 420 360 320 180 440 380 10 9 1110 12 11 127.000 225.000 Required (round all numbers to two decimal places, if needed): Run a regression analysis on Excel for medical supplies costs using number of procedures as your driver Print a copy of the results and attach it to your homework. If you like, you can use this printout to write out your final answers to the following questions: 1. Using your results from (1), write the cost formula for medical supplies cost. Using the cost formula from (1a), what would medical supplies cost be for a month with 417 procedures? Using the high-low method, write the cost formula for medical supplies cost using number of procedures as your driver a. b. c. 2. Run a regression analysis on Excel for medical supplies costs using number of patient-hours as your driver. Print a copy of the results and attach it to your homework. If you like, you can use this printout to write out your final answers to the following questions: Using your results from (2), write the cost formula for medical supplies cost. a. b. Using the cost formula from (2a), what would medical supplies cost be for a month with 3,333 patient-hours? c. Using the high-low method, write the cost formula for medical supplies cost using number of patient-hours as your driver. Based on your answers from parts 1 & 2, which driver (number of procedures or number of patient-hours) is better for determining costs? Explain using R2 as part of your answer. 3. e: On Ic and 2c, your fixed cost answers will be slightly different using the high number andor the low numb to rounding. Whichever way you chose to solve it (high or low),just write that answer down for fixed cost

Answer 1

1. Here the Values in the coefficient column are the values required to derive the cost formula. The X- Variable is the number of procedures and the intercept is the constant cost.

1.A.

Answer: The cost formula for medical supplies cost is

Medical Supplies Cost = 39942.83 + (Number of Procedures)* 354.62

1. B.

Answer: The Medical Supplies Cost for the month with 417 procedures is

Medical Supplies Cost = 39942.83 + 417 * 354.62

• Medical Supplies Cost = 39942.83 + 147876.54
• Medical Supplies Cost = 187819.37

Thus, the medical supplies cost is $187819.37 for the month with 417 procedures.

1. C.

Answer: High-Low Method uses the Highest and the Lowest Activity Level to find the cost formula.

Highest Activity Level (i.e. Number of Procedures) = 520

Medical Supplies Cost for highest level = $238,000

Lowest Activity Level (i.e. Number of Procedures) = 180

Medical Supplies Cost for lowest level = $83,000

• Variable Cost per procedure = (Change in cost)/ (change in Units)
• Variable Cost per procedure = (238000 – 83,000) / (520 – 180)
• Variable Cost per procedure = 7750/17
• Variable Cost per procedure = $455.88

Fixed Cost = Total Cost for a level of activity – Variable cost for that Activity

Here, the activity level is the highest number of Procedures.

• Fixed Cost = 238000 – 520* 455.88
• Fixed Cost = $ 942.4