Refer to the laboratory overhead cost and activity data for Elmhurst Health Center in E6-32A. Use the high-low method to determine the laboratory’s cost equation for total laboratory overhead. Use your results to predict total laboratory overhead if 3,100 lab tests are performed next month.

Data From E6-32A:-

The manager of the main laboratory facility at Elmhurst Health Center is interested in being able to predict the overhead costs each month for the lab. The manager believes that total overhead varies with the number of lab tests performed but that some costs remain the same each month regardless of the number of lab tests performed.
The lab manager collected the following data for the first seven months of the year:

Requirements:

1. Prepare a scatterplot of the lab’s volume (number of lab tests performed) and total laboratory overhead costs.
2. Does the data appear to contain any outliers? Explain.
3. How strong a relationship is there between the number of lab tests performed and laboratory overhead costs?

Transcribed Image Text:

Month January.. Number of Lab Tests Performed 3,000 Total Laboratory Overhead Costs $21,900 February.. 2,850 $20,600 March 3,400 $28,900 April..... 3,700 $31,000 May. 3,900 $28,000 June. 1,900 $20,200 July. 2,050 $14,000