Dr. Franklin, of Franklin 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: (Click the icon to view the data.) Read the Requirement 1. Compute the linear cost function, relating total overhead costs to physician contact hours, using the representative observations of 230 and 330 hours. Plot the linear cost function Does the constant component of the cost function represent the fixed overhead costs of Franklin and Associates? Why? Select the labels for the cost function using the representative observations of 230 and 330 hours. Data table Requirements 1. Compute the linear cost function, relating total overhead costs to physician contact hours, using the representative observations of 230 and 330 hours. Plot the linear cost function. Does the constant component of the cost function represent the fixed overhead costs of Franklin and Associates? Why? 2. What would be the predicted total overhead costs for (a) 180 hours and (b) 430 hours using the cost function estimated in requirement 1? Plot the predicted costs and actual costs for 180 and 430 hours. 3. Dr. Franklin had a chance to do some school physicals that would have boosted physician contact hours billed to patients from 230 to 280 hours. Suppose Dr. Franklin, guided by the linear cost function, rejected this job because it would have brought a total increase in contribution margin of $7,500, before deducting the predicted increase in total overhead cost, $12,500. What is the total contribution margin actually forgone? Dr. Franklin, of Franklin 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: (Click the icon to view the data.) Read the Requirement 1. Compute the linear cost function, relating total overhead costs to physician contact hours, using the representative observations of 230 and 330 hours. Plot the linear cost function Does the constant component of the cost function represent the fixed overhead costs of Franklin and Associates? Why? Select the labels for the cost function using the representative observations of 230 and 330 hours. Data table Requirements 1. Compute the linear cost function, relating total overhead costs to physician contact hours, using the representative observations of 230 and 330 hours. Plot the linear cost function. Does the constant component of the cost function represent the fixed overhead costs of Franklin and Associates? Why? 2. What would be the predicted total overhead costs for (a) 180 hours and (b) 430 hours using the cost function estimated in requirement 1? Plot the predicted costs and actual costs for 180 and 430 hours. 3. Dr. Franklin had a chance to do some school physicals that would have boosted physician contact hours billed to patients from 230 to 280 hours. Suppose Dr. Franklin, guided by the linear cost function, rejected this job because it would have brought a total increase in contribution margin of $7,500, before deducting the predicted increase in total overhead cost, $12,500. What is the total contribution margin actually forgone
