Weber Valley Regional Hospital has collected data on all of its activities for the past 16 months. Data for cardiac nursing care follow:

Required:
1. Using the high-low method, calculate the variable rate per hour and the fixed cost for the nursing care activity.
2. Run a regression on the data, using hours of nursing care as the independent variable. Predict cost for the cardiac nursing care for September 2007 if 1,400 hours of nursing care are forecast. Evaluate the regression equation. How comfortable are you with the predicted cost for September 2007?
3. Upon looking into the events that happened at the end of 2006, you find that the cardiology ward bought a cardiac-monitoring machine for the nursing station.
Administrators also decided to add a new supervisory position for the evening shift. Monthly depreciation on the monitor and the salary of the new supervisor together total \($10,000\). Now, run two regression equations, one for the observations from 2006 and the second using only the observations for the eight months in 2007. Discuss your findings. What is your predicted cost of the cardiac nursing care activity for September 2007?

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Y X Cost Hours of Nursing Care May 2006 June 2006 $59,600 1,400 57,150 1,350 July 2006 61,110 1,460 August 2006 65,800 1,600 September 2006 69,500 1,700 October 2006 64,250 1,550 November 2006 52,000 1,200 December 2006 66,000 1,600 January 2007 83,000 1,800 February 2007 66,550 1,330 March 2007 79,500 1,700 April 2007 76,000 1,600 May 2007 68,500 1,400 June 2007 73,150 1,550 July 2007 73,175 1,505 August 2007 66,150 1,290