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Question 3. Cost Estimation 25% Assume Brentline Hospital is interested in predicting future maintenance costs for budgeting purposes. Management believes that maintenance cost is a
Question 3. Cost Estimation 25% Assume Brentline Hospital is interested in predicting future maintenance costs for budgeting purposes. Management believes that maintenance cost is a mixed cost, and that the variable portion of this cost is driven by patient-days. The hospital's CFO has gathered the following information for the last seven months: Month January February March April May June Activity Level: Patient Days 5,600 7,100 5,000 6,500 7,300 8,000 6,200 Maintenance Costs Incurred $7,900 $8,500 $7,400 $8,200 $9,100 9,800 $7,800 Questions 1. What is the formula for calculating mixed costs? (5 pts) From the above data, using the High-Low Method calculate the variable cost per patient day. (S pts) 2. 3. Use the answer from 2. To calculate Total Fixed Cost.(5 pts) 4. Calculate the estimated Maintenance Cost incurred during a month with 9,000 patient days. (5 pts) 5. What do you think is the major weakness of the High-Low Method? (5 pts.)
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