oil Telstra FF9:38 1 44% vuws.westernsydney.edu.au Problem solving assignment Page 10 of 12 Problem 6: "I don't understand this cost report at all', exclaimed John Carter, the newly appointed administrator of AngelCare General Hospital. "Our administrative costs in the new paediatrics clinic are difficult to understand. On month the report shows $16, 600, and the next month it's $32, 200. What's going on?" Carter question was posed to Alice Baines, the hospital's accountant. "The main problem is that the clinic has experience some widely varying patient loads in its first year of operation. Baines replied. "There seems to be some confusion in the public's mind about what services we offer in the clinic. When do they come to the clinic? When do they go the outpatients' department? That sort of thing. As the patient load has varied, we've frequently changed our clinic administrative staffing. Also, we have found that the number of emergency procedures varies each month, and emergency procedures cause additional staff costs.' Carter continued to puzzle over the report. 'Could you put some data together, Alice, so we can see how this cost behaves over a range of patient loads?' following date: You'll have it this afternoon', Baines responded. She set to work right away and gathered the Month Number of emergency procedures Patient load Administrative cost January 20 2 800 $27 800 February 22 1 000 14 000 March 10 800 12 000 April 20 2 000 20 000 May 24 2 600 23 800 June 28 1 800 18 400 July 16 2 200 20 400 August 14 600 8 200 September 24 1 400 18 800 October 24 2 400 22 200 November 16 1 200 16 600 December 32 3 000 32 200 Baines does not believe that the first year's widely fluctuating patient load will be experienced again in future, she has estimated that the clinic's relevant range of monthly activity in the future will be 600 to 1 200 patients. Required: 1. Assume that the relevant range is within 600 and 1200 patients. Use the high-low method to estimate the behaviour of the clinic's administrative costs, based on patient load within the relevant range. Use an equation to express the results of this estimation method. 2. What is your prediction of the clinic's administrative cost during a month when 800 patients visit the hospital? Problem solving assignment Page 11 of 12 3. Would you use the cost function from requirement I to predict the clinic's administrative cost for 300 patient visits? Explain your answer. 4. Identify the number of emergency procedures, patient load and administrative costs for each month within the relevant range