Maintenance cost at a hospital was observed to increase as activity level increased. The following data was gathered: Activity Level - Maintenance…

In cost accounting and regression analysis, a cost equation is often expressed as Y = a + bX. In this formula, 'Y' is the dependent variable (the total cost being analyzed), and 'X' is the independent variable (the activity level or cost driver that causes the cost to change). The data shows that "Total maintenance cost" (Y) changes as the "Patient Days" (X) activity level changes. Therefore, "Patient days" is the independent variable because it is the factor used to predict or explain the variation in maintenance costs.

A. Fixed cost.

This is a component of the total cost ('a' in the equation) that remains constant regardless of the activity level; it is not the independent variable.

B. Variable cost.

This refers to the cost per unit of activity ('b' in the equation), which is the slope of the cost line, not the activity level itself.

C. Total maintenance cost.

This is the dependent variable ('Y' in the equation), as its value is predicted by, or depends on, the level of the independent variable (patient days).

1. Horngren

C. T.

Datar

S. M.

& Rajan

M. V. (2015). Cost accounting: A managerial emphasis (15th ed.). Pearson Education. In Chapter 10

"Determining How Costs Behave

" the text defines the independent variable (or cost driver) as the factor whose change causes a change in the total cost

the dependent variable. In this scenario

patient days are the cost driver. (pp. 336-337).

2. Garrison

R. H.

Noreen

E. W.

& Brewer

P. C. (2018). Managerial Accounting (16th ed.). McGraw-Hill Education. Chapter 5

"Cost Behavior: Analysis and Use

" clarifies that the independent variable is the activity base (e.g.

patient-days

machine-hours) that is presumed to cause variations in the dependent variable (total cost). (p. 188).

3. MIT OpenCourseWare. (2004). 15.963

Management Accounting and Control

Spring 2007. Lecture Notes

Session 4: Cost Behavior and Estimation. The course materials describe the cost function where the independent variable is the measure of activity that is used to predict the dependent variable

which is the total cost. This directly supports identifying "Patient days" as the independent variable.