Part 1 The administrator of Azalea Hills Hospital would like a cost formula linking the administrative costs involved in admitting patients to the number of patients admitted during a month. The Admitting Departments costs and the number of patients admitted during the immediately preceding eight months are given in the following table: (a) Use the high-low method to estimate the fixed and variable component of admitting cost. (b) Use the cost formula you developed in part a to predict admitting cost for 1,400 patient days.

Part 2 Craft Company and Jarmer Company each have sales of $200,000 and costs of $140,000. Craft Company's costs consist of $40,000 fixed and $100,000 variable, while Jarmer Company's costs consist of $100,000 fixed and $40,000 variable. (a)Prepare contribution margin income statements and compute the degree of operating leverage for each company (b) Which company will suffer the greatest decline in income if sales volume declines by 15%? By how much will each companys income decline?

\begin{tabular}{|c|c|c|} \hline Month & \# of Patient Days & Admitting Dept Costs \\ \hline May & 1,800 & $14,700 \\ \hline June & 1,900 & $15,200 \\ \hline July & 1,700 & $13,700 \\ \hline August & 1,600 & $14,000 \\ \hline September & 1,500 & $14,300 \\ \hline October & 1,300 & $13,100 \\ \hline November & 1,100 & $12,800 \\ \hline December & 1,500 & $14,600 \\ \hline \end{tabular}