Multiple Regression Analysis for a Special Decision (Requires Computer Spreadsheet) For billing purposes, Galaxy Health...
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Multiple Regression Analysis for a Special Decision (Requires Computer Spreadsheet) For billing purposes, Galaxy Health Clinic classifies its services into one of four major procedures, X1 through X4. A local business has proposed that Galaxy provide health services to its employees and their families at the following set rates per procedure:
X1
$45
X2
90
X3
60
X4
105
Because these rates are significantly below the current rates charged for these services, management has asked for detailed cost information on each procedure. The following information is available for the most recent 12 months.
Number of Procedures
Month
Total Cost
X1
X2
X3
X4
1
$11,500
15
50
103
38
2
12,500
19
60
90
45
3
13,500
25
40
70
75
4
9,500
10
45
60
50
5
10,000
34
25
80
40
6
13,500
45
38
105
53
7
12,750
10
55
95
55
8
10,750
8
60
88
40
9
13,000
30
43
62
70
10
11,000
10
45
50
70
11
11,400
10
35
75
65
12
13,250
36
30
100
60
Required a. Use multiple regression analysis to determine the unit cost of each procedure. How much variation in monthly cost is explained by your cost-estimating equation?
Round each answer to two decimal places.
Y
=
Answer
-1985.51
+
Answer
55.94
X1
+
Answer
63.77
X2
+
Answer
535.54
X3
+
Answer
102.02
X4
b. Evaluate the rates proposed by the local business. Assuming South Town has excess capacity and no employees of the local business currently patronize the clinic.
Use negative signs with answers only to indicate a loss. Otherwise do not use negative signs with your answers.
Comparison of Proposed Rates and Estimated Variable Costs
Procedure
X1
X2
X3
X4
Proposed rate
45
90
60
105
Estimated cost
Answer
Answer
Answer
Answer
Profit (loss)
Answer
Answer
Answer
Answer
c. Evaluate the rates proposed by the local business. Assuming Galaxy is operating at capacity and would have to turn current customers away if it agrees to provide health services to the local business, what are your recommendations regarding the proposal?
Galaxy should accept the proposal. (Correct )
Galaxy should reject the proposal.
Mark 1.00 out of 1.00
Answer & Explanation
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