Question

The number of blood tests performed and the related costs over the last nine months in Brentline Hospital are given below:

Month	Blood Tests Performed	Blood Test Costs
January	5,115	$	58,968
February	6,600	$	73,640
March	4,565	$	52,478
April	4,015	$	46,440
May	4,175	$	48,746
June	3,300	$	39,320
July	3,875	$	44,752
August	5,010	$	56,890
September	5,045	$	57,958

Required:

1. Using the high–low method, estimate the cost formula for blood tests. (Round cost per unit answer to 2 decimal places.)

2. Using the cost formula you derived above, what blood test costs would you expect to be incurred during a month in which 4,455 blood tests are performed? (Round your intermediate calculations answer to 2 decimal places.)

Answer 1

Estimate the costs with High-Low Method Month Tests Performed Blood Test Cost High level of Activity February 6600 73640 low level of Activity 3300 393201 Difference 3300 34320 June Fixed Cost (73640-6600*10.40)) 5000 Per month Varaible cost Per unit (34320/3300) 10.40 Per Emploess Hour 1) Blood test Cost Equation = $5000+($ 10.40* Tests Performed) 2) Cost at 4455 = 5000+10.40*4455 51332 Variable Cost = Differece in cost / Difference in test Fixed cost = Cost-(tests *Variable Cost) Cost Equation = Fixed Cost +(Hours * Varaible cost Per test)