Clarion Clinics operates a chain of 24-hour walk-in clinics. The administrator is trying to understand the variation in Clarion’s costs across the different clinics. The chief medical officer believes that the number of walk-in clients is the best measure to explain an individual clinic’s costs. The cost analyst collected data from the past year from Clarion’s 27 clinics. The data collected were clinic cost (labor, supplies, and so on) along with the number of walk-in clients visiting each of the clinics. The following output was generated from a regression analysis of clinic cost on walk-in clients:
Required a. Use the regression output to write the cost equation for clinic costs. b. Based on the cost equation, compute the estimated costs for a clinic with 15,000 walk-in clients in a year. c. The director of surgery has asked you for advice on whether he should rely on the estimate. What will you say?