Wollongong Pathology is a medical testing laboratory situated in Wollongong. Dr. Curin Strong the CEO of the center is in the process of making an estimation on the cost of X- rays of the center. The number of X-rays taken and X-ray costs over the last nine months in Wollongong Pathology are given below:
Month
X-Rays Taken
X-Rays Costs($)
January
6,250
$28,000
February
7,000
$29,000
March
5,000
$23,000
April
4,250
$20,000
May
4,500
$22,000
June
3,000
$17,000
July
3,750
$18,000
August
5,500
$24,000
September
3,250
$16,000
a. Using High-Low method, estimate the cost formula for X-ray costs.
b. Estimate the cost of X-rays for October using both regression and high-low methods, assuming a least-square regression analysis estimated the total fixed costs to be $5,920 per month and the variable cost to be $3.38. The number of X-rays for October is expected to be 4,000. Comment on the accuracy of the high-low estimates.