Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN: 9781305970663
Author: Don R. Hansen, Maryanne M. Mowen
Publisher: Cengage Learning
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Question
Chapter 3, Problem 18E
1.
To determine
Calculate the cost formula for radiology services using the method of least squares.
2.
To determine
Calculate the predicted cost of radiology services for October 3,500 appointments using the formula computed in the requirement 1.
3.
To determine
Identify the coefficient of determination tell about the cost formula calculated in the requirement, the t statistics for the number of tests and the intercept term. Determine these statistics tell you about the choice of number of tests as the independent variable and the probability that are fixed costs.
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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
ax Length of stay (measured in days), plus
bx Presence of one or more complications (= 1 if true, O if false), plus
cx 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 52 patients, showed the following regression results:
R-squared: 59%
Constant term: $3,402
Coefficients and t-values for independent variables:
Coefficient
t-value
Length of Stay
$ 860
11.19
Complications
$ 1,867
4.73
Laparoscope
$ 915
3.49
Required:
1. What is…
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…
Recent monthly costs of providing on-board flight service incurred by Great Plains Airlines are shown in the following table.
Required:1. Build a spreadsheet: Construct an Excel spreadsheet and use the Excel commands to perform a least-squares regression. Estimate the cost behavior of the airline’s on-board flight service. Express the cost behavior in equation form.2. Use Excel to calculate and interpret the R2 value for the regression.
Chapter 3 Solutions
Cornerstones of Cost Management (Cornerstones Series)
Ch. 3 - Why is knowledge of cost behavior important for...Ch. 3 - How does the length of the time horizon affect the...Ch. 3 - Prob. 3DQCh. 3 - What is the relationship between flexible...Ch. 3 - What is the relationship between committed...Ch. 3 - Describe the difference between a variable cost...Ch. 3 - Why do mixed costs pose a problem when it comes to...Ch. 3 - Why is a scattergraph a good first step in...Ch. 3 - What are the advantages of the scatterplot method...Ch. 3 - Prob. 10DQ
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