FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Recent research into the cost of various medical procedures has shown the impact of certain complications encountered in surgery on the total cost of a patient’s stay in the hospital. The researchers used regression analysis and found the following results:
Total cost for patient = Constant, plus
a × Length of stay (measured in days), plus
b × Presence of one or more complications (= 1 if true, 0 if false), plus
c × Use of a laparoscope (= 1 if true, 0 if false)
where a, b, c are coefficients of the regression model. The laparoscope is an instrument somewhat like a miniature telescope with a fiber-optic system that brings light into the abdomen. It is about as big around as a fountain pen and twice as long.
The research, based on 63 patients, showed the following regression results:
R-squared: 56%
Constant term: $3,158
Coefficients and t-values for independent variables:
| Length of Stay | Complications | Laparoscope | |
|---|---|---|---|
| Coefficient | $ 887 | $ 1,912 | $ 928 |
| t-value | 7.51 | 5.30 | 2.26 |
Required:
1. What is the estimated cost for a patient whose surgery has complications and who stays in the hospital 4 days, and whose surgery requires a laparoscope?
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