Dr. Abbot, of Abbot and Associates, LLP, is examining how overhead costs behave as a function of monthly physician contact hours billed to patients. The historical data are as follows:

Requirements

1.	Compute the linear cost function, relating total overhead costs to physician contact hours, using the representative observations of 250 and 300 hours. Plot the linear cost function. Does the constant component of the cost function represent the fixed overhead costs of Abbot and Associates? Why?
2.	What would be the predicted total overhead costs for (a) 200 hours and (b) 450 hours using the cost function estimated in requirement 1? Plot the predicted costs and actual costs for 200 and 450 hours.
3.	Dr. Abbot had a chance to do some school physicals that would have boosted physician contact hours billed to patients from 250 to 300 hours. Suppose Dr. Abbot, guided by the linear cost function, rejected this job because it would have brought a total increase in contribution margin of $10,000, before deducting the predicted increase in total overhead cost, $15,000. What is the total contribution margin actually forgone?

Data table

Total Overhead Costs	Physician Contact Hours Billed to Patients
$92,000	200
112,000	250
113,000	300
127,000	300
139,000	400
152,000	450

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Requirement 1. Compute the linear cost function, relating total overhead costs to physician contact hours, using the representative observations of 250 and 300 hours. Plot the linear cost function. Does the constant component of the cost function represent the fixed overhead costs of Abbot and Associates? Why? Select the labels for the cost function using the representative observations of 250 and 300 hours.

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PLEASE COMPLETE ALL REQUIREMENTS