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Question 3. Cost Estimation 25% Assume Brentline Hospital is interested in predicting future maintenance costs for budgeting purposes. Management believes that maintenance cost is
Question 3. Cost Estimation 25% Assume Brentline Hospital is interested in predicting future maintenance costs for budgeting purposes. Management believes that maintenance cost is a mixed cost, and that the variable portion of this cost is driven by patient-days. The hospital's CFO has gathered the following information for the last seven months: Month January February March April May June July Questions: Activity Level: Patient Days 5,600 7,100 6,500 7,300 6,200 Maintenance Costs Incurred $7,900 $8,500 $7,400 $8,200 $9,100 $9,800 $7,800 1. 2. 3. 4. 5. What is the formula for calculating mixed costs? (5 pts) From the above data, using the High-Low Method calculate the variable cost per patient day. (5 pts) Use the answer from 2. To calculate Total Fixed pts) Calculate the estimated Maintenance Cost incurred during a month with 9,000 patient days. (5 pts) What do you think is the major weakness of the High-Low Method? (5 pts.)
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