Problem:
The number of X-rays taken and X-ray costs at a hospital over the last nine months are:
Month X-Rays Taken X-Ray Cost
January 6,250 $28,000
February 7,000 29,000
March 5,000 23,000
April 4,250 20,000
May 4,500 22,000
June 3,000 17,000
July 3,750 18,000
August 5,500 24,000
September 5,750 26,000
1. Use high-low method, estimate the cost formula for X-ray costs.
29,000 17,000 = 12,000 = $3.00
7,000 3,000 4,000
$29,000
-21,000 ($3.00 X 7,000 = 21,000)
$ 8,000
2. Using the cost formula you derived above, what X-ray costs would you expect to be incurred during a month in which 4,600 X-rays are taken?
29,000 17,000 = 12,000 = $5.00
7,000 4,600 2,400
$29,000
35,000 ($5.00 X 7,000 = 35,000)