Multiple Regression Analysis for a Special Decision (Requires Computer Spreadsheet’)

For billing purposes, Galaxy Health Clinic classifies its services into one of four major procedures, X1 through X4. A local business has proposed that Galaxy provide health services to its employees and their families at the following set rates per procedure:

Because these rates are significantly below the current rates charged for these services, management has asked for detailed cost information on each procedure. The following information is available for the most recent 12 months.

Required

a. Use multiple regression analysis to determine the unit cost of each procedure. How much variation in monthly cost is explained by your cost-estimating equation?

b. Evaluate the rates proposed by the local business. Assuming Galaxy has excess capacity and no employees of the local business currently patronize the clinic, what are your recommendations regarding the proposal? Evaluate the rates proposed by the local business. Assuming Galaxy is operating at capacity and would have to turn current customers away if it agrees to provide health services to the local business, what are your recommendations regarding the proposal?

c. Evaluate the rates proposed by the local business. Assuming Galaxy is operating at capacity and would have to turn current customers away if it agrees to provide health services to the local business, what are your recommendations regarding the proposal?

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X1 X2 X3 X4 $ 45 105 888 90 60