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Question - The data below have been taken from the cost records of the hospital. The data relates to the costs of admitting patients at various levels of patient activity.
Month
Number of Patients Admitted
Admitting Department Costs
January
3,600
$29,400
February
3,800
$30,400
March
2,900
$27,400
April
3,200
$28,000
May
3,300
$28,600
June
2,600
$26,200
July
2,200
$25,600
August
3,500
$29,200
Required -
1. Why is it potentially problematic that the high-low method only uses two data points to determine the cost function?
2. Using the high-low method, estimate the fixed cost of admitting patients per month and the variable cost of admissions per patient.
3. If the number of patients admitted in September is estimated to be 3,400, what would be the estimated Admitting Department Costs?
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