Southside Hospital Is Trying to Get a Better Idea of the Costs

question 82

Essay

Southside Hospital is trying to get a better idea of the costs in its cardiac surgical unit.Unit cost data for supplies,labor,etc.have been collected for a three-year period.After analyzing the data using Excel,the following output was generated,based on 1,500 procedures.Intercept = $2,169,000
Coefficient on procedures $972
Correlation coefficient = .448
R² = .189
The controller asks you for advice on whether to rely on this estimate.Based on the output,what would you say?

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Definitions:

Net Requirements

The total demand for a product or component minus the inventory already on hand or on order, used in manufacturing and inventory management.

Gross Requirements

The total amount of materials or components needed to fulfill production or sales orders, before considering inventory on hand or scheduled receipts.

Component N

Refers specifically to an undefined or unspecified element within a system, implying a placeholder name for any part or aspect under consideration.

Product Structure Tree

A hierarchical representation of the components and sub-components required to build a product, illustrating the relationship between parts.