Dr. Reidy, of Dr. Reidy 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:

Data table Requirements 1. Compute the linear cost function, relating total overhead costs to physician contact hours, using the representative observations of 210 and 260 hours. Plot the linear cost function. Does the constant component of the cost function represent the fixed overhead costs of Reidy and Associates? Why? 2. What would be the predicted total overhead costs for (a) 160 hours and (b) 410 hours using the cost function estimated in requirement 1? Plot the predicted costs and actual costs for 160 and 410 hours. 3. Dr. Reidy had a chance to do some school physicals that would have boosted physician contact hours billed to patients from 210 to 260 hours. Suppose Dr. Reidy, 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