An accountant for a laboratory wishes to disaggregate the business costs into the variable cost per diagnostic test and the fixed cost than must be paid irrespective of how many test had been performed. The accountant provides the following summary statistics:

mean Cost () 83,074 Tests 5,300

std. dev. 10,800 1,060

minimum 61,000 3,050

maximum 99,000 7,100

n = 12, correlation = 0.981. Use a simple linear regression to estimate the laboratorys fixed and variable costs.

The accountant had proposed a variable cost of 8 per test when designing the budget at the beginning of the year. At the 5% significance level, assess whether or not the accountants proposed rate was reasonable given that the residual standard error from the fitted regression model is 2,190.