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For billing purposes, assume Phoenix Family Medical Clinic classifies its services into one of four major procedures, X1 through X4. A local business has
For billing purposes, assume Phoenix Family Medical Clinic classifies its services into one of four major procedures, X1 through X4. A local business has proposed that Phoenix provide health services to its employees and their families at the following set rates per procedure: X1.... X2. X3. X4. Because these rates are significantly below the current rates charged for these services, manage- ment has asked for detailed cost information on each procedure. The following information is avail- able for the most recent 12 months. Month 23 2. 3. 4 567 8 9 10. 11 12. Total Cost $17,250 18,750 20,250 14,250 15,000 20,250 19,125 16,125 19,500 16,500 17,100 19,875 X1 30 38 50 20 68 90 20 16 60 20 20 72 Number of Procedures X2 25 30 20 25 15 19 30 30 21 22 18 15 X3 155 135 105 90 120 158 143 132 93 75 113 150 X4 19 23 38 25 20 14 28 20 35 $100 200 60 300 35 33 30 Required a. Use multiple regression analysis to determine the unit cost of each procedure. How much variation in monthly cost is explained by your cost-estimating equation? b. Evaluate the rates proposed by the local business. Assuming Phoenix has excess capacity and no employees of the local business currently patronize the clinic, what are your recommendations regarding the proposal? c. Evaluate the rates proposed by the local business. Assuming Phoenix is operating at capacity and would have to turn current customers away if it agrees to provide health services to the local busi- ness, what are your recommendations regarding the proposal?
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