Multiple Regression Analysis for a Special Decision (Requires Computer Spreadsheet) For billing purposes, South Town Health Clinic classifies its services into one of four major procedures, X1 through X4. A local business has proposed that South Town provide health services to its employees and their families at the following set rates per procedure:

X1	$45
X2	90
X3	60
X4	105

Because these rates are significantly below the current rates charged for these services, management has asked for detailed cost information on each procedure. The following information is available for the most recent 12 months.

		Number of Procedures
Month	Total Cost	X1	X2	X3	X4
1	$23,000	30	100	205	75
2	25,000	38	120	180	90
3	27,000	50	80	140	150
4	19,000	20	90	120	100
5	20,000	67	50	160	80
6	27,000	90	75	210	105
7	25,500	20	110	190	110
8	21,500	15	120	175	80
9	26,000	60	85	125	140
10	22,000	20	90	100	140
11	22,800	20	70	150	130
12	26,500	72	60	200	120

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?

Round each answer to two decimal places.

Y

=

$Answer

+

$Answer

X1

+

$Answer

X2

+

$Answer

X3

+

$Answer

X4

b. Evaluate the rates proposed by the local business. Assuming South Town has excess capacity and no employees of the local business currently patronize the clinic.

Use negative signs with answers only to indicate a loss. Otherwise do not use negative signs with your answers.

Comparison of Proposed Rates and Estimated Variable Costs
Procedure	X1	X2	X3	X4
Proposed rate	$Answer	$Answer	$Answer	$Answer
Estimated cost	Answer	Answer	Answer	Answer
Profit (loss)	$Answer	$Answer	$Answer	$Answer

c. Evaluate the rates proposed by the local business. Assuming South Town is operating at capacity and would have to turn current customers away if it agrees to provide health services to the local business, what are your recommendations regarding the proposal?

South Town should accept the proposal.

South Town should reject the proposal.