# Question: Question One: (6 Points) A hospital’s records show that the cost of carrying out health checks in the last five accounting periods have been as follows: Period Number of patients seen Total cost 650 \$17,125 2 940 17,800 3 1260 18,650 4 990 17,980 1150 18,360 Required: Using high-low method, 1. Estimate the cost function. 2. Estimate the total cost for period 6 if the number of patients seen is 1500. 3. What is the difference between using the High – low method and Least Square (Regression) method. – Free Chegg Question Answer

`Transcribed text From Image: Question One: (6 Points) A hospital's records show that the cost of carrying out health checks in the last five accounting periods have been as follows: Period Number of patients seen Total cost 650 \$17,125 2 940 17,800 3 1260 18,650 4 990 17,980 1150 18,360 Required: Using high-low method, 1. Estimate the cost function. 2. Estimate the total cost for period 6 if the number of patients seen is 1500. 3. What is the difference between using the High – low method and Least Square (Regression) method.`

`Answer:`

1. High low method is a way of separating fixed and variable cost, It takes cost at highest and lowest activity to find variable costs.

variable costs= change in cost/ change in activity

=\$1,525/610

=\$2.5 per patient

Cost function

Y= a+bX

where,

Y = total cost

a= Total fixed cost

b= variable cost per patient

X= number of patient

\$17,125=fixed cost + \$2.5*650

\$17,125= fixed cost+1,625

Fixed cost = \$17,125-1,625

=\$15,500

Cost function:

Y = \$15,500+\$2.5X

2. cost for 1,500 patients

Y = \$15,500+\$2.5*1,500

=\$15,500+\$3,750

=\$19,250

Cost for period 6 is \$19,250

3.Difference