Q1. Billie Johnson is the Chief Operating Officer at Union Hospital in Newark, New Jersey. She is analyzing the hospital's overhead costs but is not sure whether nursing hours or the number of patient days would be the best cost driver to use for predicting the hospital's overhead.
She has gathered the following information for the last six months of the most recent year:
Read the requirements:
1. Are the hospital's overhead costs fixed, variable, or mixed? Explain.
2. Graph the hospital's overhead costs against nursing hours.
3. Graph the hospital's overhead costs against the number of patient days.
4. Do the data appear to be sound or do you see any potential data problems? Explain.
5. Use the highlow method to determine the hospital's cost equation using nursing hours as the cost driver. Predict total overhead costs if 23,500 nursing hours are predicted for the month.
6. Ms. Johnson runs a regression analysis using nursing hours as the cost driver to predict total hospital overhead costs. The Excel output from the regression analysis is shown here
If 23,500 nursing hours are predicted for the month, what is the total predicted hospital overhead?
7. Ms. Johnson then ran the regression analysis using number of patient days as the cost driver. The Excel output from the regression is shown here:
If 3,800 patient days are predicted for the month, what is the total predicted hospital overhead?
8. Which regression analysis (using nursing hours or using number of patient days as the cost driver) produces the best cost equation? Explain your answer.
Q2. Carmichael Industries is in the process of analyzing its manufacturing overhead costs. Carmichael Industries is not sure if the number of units produced or the number of direct labor (DL) hours is the best cost driver to use for predicting manufacturing overhead (MOH) costs.
Requirements-
1. Are manufacturing overhead costs fixed, variable, or mixed? Explain.
2. Graph Carmichael Industries' manufacturing overhead costs against DL hours.
3. Graph Carmichael Industries' manufacturing overhead costs against units produced.
4. Do the data appear to be sound, or do you see any potential data problems? Explain.
5. Use the highlow method to determine Carmichael Industries' manufacturing overhead cost equation using DL hours as the cost driver. Assume that management believes that all data is accurate and wants to include all of it in the analysis.
6. Estimate manufacturing overhead costs if Carmichael Industries incurs 25,500 DL hours in January.
Attachment:- Assignment Files.rar