Question

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 January February March Radiology Tests 2,800 2,600 3,100 3,500 3,400 3,700 April Total Cost $133,500 135,060 175,000 170,600 176,900 186,600 174,450 195,510 185,300 May June July August 3,840 4,100 3,450 September Required: + 1. Compute the cost formula for radiology services using the method of least squares. If required, round your answers to two decimal places. Y- 2. Using the formula computed in Requirement 1, what is the predsed cost of radiology services for October for 3,500 appointments? (Round the answer to the nearest dollar)

Answer 1

The result of the regression analysis:

Part 1

Y = $36588.82 + $39.48X

Intercept indicated fixed cost

X variable indicates variable cost per unit

Part 2

Predicted cost = $36588.82 + ($39.48*3500) = $174769