Question

Month	Hospital Overhead Cost	Nursing Hrs	# of Patient Days	Overhead Cost Per Nursing Hrs	Overhead cost Per Patient Day
July	965,000	51,000	8,000	18.92	120.63
August	1,000,000	53,000	9,000	18.86	111.11
September	830,000	38,000	8,750	21.84	94.86
October	925,000	43,000	7,000	21.51	132.14
November	1,100,000	65,000	12,000	16.92	91.67
December	900,000	42,000	7,900	21.42	113.92

The hospital ran a regression analysis using nursing hours as the cost driver to predict total hospital overhead costs. The regression analysis produced the following data:

Intercept: 346245

Slope: 12.81796

RSQ: 0.909311

A.) Round the variable portion of the regression equation formula to two decimal places. Based on the regression equation formula, what will the predicted total hospital overhead costs be if 54,000 nursing hours are expended during a month?

The hospital then ran a regression analysis using number of patient days as cost driver. The regression analysis produced the following data:

Intercept: 559764

Slope: 47.970926

RSQ: 0.563496482

B.) Again, round the variable portion of the regression equation to two decimal places. If 9,500 patient days are predicted for a month, what is the total predicted hospital overhead costs using the regression equation?

C.) Which regression equation, the one using nursing hours as the cost driver or the one using patient days as the cost driver, produces the most accurate correlation (best explanation of) the predicted hospital overhead costs. How do you know that your answer is correct? In other words, justify your answer.

Answer 1