I feel confused about this question, and how to solve.
P6-62A Analyze cost behavior at a hospital using various cost estimation methods (Learning Objectives 1, 2, 3, 4, 6' 5) Sandy Dawson is the Chief Operating Ofcer at Mercy Hospital in Atlanta, Georgia. She is analyzing the hospital's overhead costs but is not sure whether nursing hours or the number of patient days would be the best cost driver to use for predicting the hospital's overhead. She has gathered the following information for the last six months of the most recent year: Month Hospital Nursing Number Overhead Overhead Overhead Hours of Cost per Cost per Costs Patient Nursing Patient Days Hour Day July $483,000 24,500 3,790 $19.71 $ 127.44 August $535,000 28,500 4,310 $18.77 $ 12 September $411,000 19,500 4,230 $21.08 $ 97.16 October $451,000 20,500 3,450 $22.00 $ 130.72 November $576,000 32,000 5,710 $18.00 $ 100.88December $446,000 20,000 3,290 $22.30 $ 135.55 Requirements 1. Are the hospital's overhead costs fixed, variable, or mixed? Explain. 5. Use the highlow method to determine the hospital's cost equation using nursing hours as the cost driver. Predict total overhead costs if 25,500 nursing hours are predicted for the month. 6. Dawson runs a regression analysis using nursing hours as the cost driver to predict total hospital overhead costs. The Excel output from the regression analysis is as follows: . I I C D I F E 1 SUMMARY OUTPUT - Nursing hours as 0051 driver a '- +_' 72531013 Statistics 3 Multiple R 0.9811685 7 R o uare I_* . . I 5 Ad ustedR were 1 -. \"A. 6 Standard Error -- 1-: 7 Observations i 8 ANOVA 9 ' I F .J'n I ' ' 1o 1 13.352.033.459. 18.352.033.359 127599770 0.00035 11 Residual tr 525 299 875 143,824,969 _ 12 s 13 377 333 334 13 14 - Standard Lower U 11 ' 15 C091 dents Error 75011 P-wlue 95% 9531. 16 199 609.79 25 618.85 7.792 0.001 1211 480.456 270 739.113 :3 X lLr'aria - e l 11.75 1.051 11.296 0.000 8.865 14.643 A B C D SUMMARY OUTPUT - Using number of patient days as cost driver E F G 2 Regression Statistics 3 Multiple R 0.750775 4 R Square 0.563662 5 Adjusted R Square 0.454578 6 Standard Error 45,438.70968 7 Observations 6 8 ANOVA 9 df SS MS F Significance F 10 Regression 1 10,668,627,982 10,668,627,982 5.167216 0.08543 11 Residual 4 8,258,705,351 2,064,676,338 12 Total 5 18,927,333,333 13 14 Standard Lower Upper 15 Coefficients Error Stat P-value 95% 16 Intercept 95% X Variable 1 265,475.95 97,762.101 2.176 0.053 -5,955.158 536,907.056 17 52.83 23.241 2.273 0.085 -11.697 117.359 18 If 3,680 patient days are predicted for the month, what is the total predicted hospital overhead?If 25,500 nursing hours are predicted for the month, what is the total predicted hospital overhead? 7. Dawson then ran the regression analysis using number of patient days as the cost driver. The Excel output from the regression is shown here
