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How to calculate the actual cost at 150 and 400 hours?
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Question & Answer: Dr. Young, of Young and Associates, LLP, is examining how overhead costs behave as a function of monthly physician contact hour…..
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Dr. Young, of Young and Associates, LLP, is examining how overhead costs behave as a function of monthly physician contact hours billed to patients. The historical data are as follows 囲(Click the icon to view the data.) Read the requirements.
Expert Answer
First we find the cost function using the 200 and 300 physical contact hrs
Let the linear equation is y=a+bx
Y=Total overhead cost
a=fixed overhead cost
x= no of physical hrs
105000=a+200b
125000=a+300b
Solving we get b=200 and a=65000
The linear function is y=65000+200x
For 150 hrs the cost is=65000+(150*200)=95000
For 400 hrs the cost is =65000+(400*200)=145,000
