Cost Management: A Strategic Emphasis 7th Edition by Edward Blocher,David Stout ,Paul Juras,Gary Cokins

Exercise 39

Interpreting Regression Results Recent research into the cost of various medical procedures has shown the impact of certain complications encountered in surgery on the total cost of a patient's stay in the hospital. The researchers used regression analysis and found the following results:
Total cost for patient = Constant, plus
a × Length of stay (measured in days), plus
b × Presence of one or more complications (= 1 if true, 0 if false), plus
c × Use of a laparoscope (= 1 if true, 0 if false)
Where:
• a, b, c are coefficients of the regression model, and
• The laparoscope is an instrument somewhat like a miniature telescope with a fiber optic system which brings light into the abdomen. It is about as big around as a fountain pen and twice as long.
The research, based on 57 patients, showed the following regression results:
R -squared: 53%
Constant term: $3,719
Coefficients and t -values for independent variables:

Required
1. What is the estimated cost for a patient whose surgery has complications and who stays in the hospital two days, and whose surgery requires a laparoscope
2. Which, if any, dummy variables are used in this regression
3. Comment on the statistical measures for the model.