Estimating the variable and fixed cost portion of a mixed cost.
The facilities housekeeping department at St. Luke's Hospital has determined that the appropriate cost driver for housekeeping costs is patient-days. There are 10,000 patient-days per month. The department has collected the following accounts for the past month:
Monthly Housekeeping Expenses Amount
Supervisors' Salaries Expense $10,000
Depreciation Expense-Scrubbing Machines $5,000
Cleaning Supplies Expense $7,000
Hourly Workers' Wages Expense $100,000
Insurance Expense-Scrubbing Machines $2,000
Required:
Estimate the cost function using the account analysis method.