Question

Use the​ high-low method to determine the​ hospital's cost equation using nursing hours as the cost driver. Predict total overhead costs if 23 comma 500 nursing hours are predicted for the month. Use the​ high-low method to determine the​ hospital's cost equation using nursing hours as the cost driver.

Answer 1

Answer: Total cost  (23500 hours predicted ) = $ 484625

Explanation:

The question is incomplete the high and low methods requires us to use high and low level of activity together with the corresponding total costs at each level to determine the variable cost per unit. we will provide assumed total costs and nursing hours in order to show how high and low method is used to predict total costs for the next period.

Assume the following were total costs and corresponding nursing hours for the previous 3 months

Total cost                Hours

$560000             30000 hours

$400000             220000 hours

$225000             10000 hours

calculating Variable cost using high and low method

Variable cost per unit  = (high cost - low cost)/high hour - low hours)

Variable Cost Per unit =  (840000 - 225000)/ (30000 - 10000) = 16.75

Variable cost per unit = $ 16.75

Fixed costs = 560000 - (28000 x 16.75) =  560000 - 469000

Fixed costs =  $91000

Total cost  (23500 hours predicted ) =Total Fixed cost + Total Variable costs

Total cost  (23500 hours predicted ) = $91000 + (23500 x $16.75)

Total cost  (23500 hours predicted ) == $91000 + $393625

Total cost  (23500 hours predicted ) = $ 484625