Cost Classifications—Service Company A partial list of Foothills Medical Center\
ID: 2565320 • Letter: C
Question
Cost Classifications—Service Company
A partial list of Foothills Medical Center's costs follows:
1. What would be Foothills Medical Center's most logical definition for the final cost object?
2. Identify whether each of the costs is to be classified as a direct cost or an indirect cost. For purposes of classifying each cost as direct or indirect, use the patient as the cost object.
Costs Classification a. Cost of patient meals b. Nurses’ salaries c. Depreciation of X-ray equipment d. Utility costs of the hospital e. Salary of intensive care personnel f. Cost of X-ray test g. Operating room supplies used on patients (catheters, sutures, etc.) h. Salary of the nutritionist i. General maintenance of the hospital j. Cost of new heart wing k. Cost of drugs used for patients l. Cost of advertising hospital services on television m. Cost of improvements on the employee parking lot n. Cost of intravenous solutions used for patients o. Training costs for nurses p. Cost of laundry services for operating room personnel q. Doctor’s fee r. Overtime incurred in the Patient Records Department due to a computer failure s. Cost of blood tests t. Cost of maintaining the staff and visitors’ cafeteria u. Depreciation on patient roomsExplanation / Answer
1.
The revenues and costs of a medical unit are all accumulated at a single factor for charging costs which is the Patient. Patient is the basis which the medical business use for accumulation and allocation of every type of costs. Hence, the most logical definition of a final cost object shall be Patient.
2.
Costs
Classification
a
Indirect cost
b
Indirect cost
c
Indirect cost
d
Indirect cost
e
Direct cost
f
Direct cost
g
Direct cost
h
Direct cost
i
Indirect cost
j
Indirect cost
k
Indirect cost
l
Indirect cost
m
Indirect cost
n
Direct cost
o
Indirect cost
p
Direct cost
q
Indirect cost
r
Indirect cost
s
Indirect cost
t
Direct cost
u
Indirect cost
Costs
Classification
a
Indirect cost
b
Indirect cost
c
Indirect cost
d
Indirect cost
e
Direct cost
f
Direct cost
g
Direct cost
h
Direct cost
i
Indirect cost
j
Indirect cost
k
Indirect cost
l
Indirect cost
m
Indirect cost
n
Direct cost
o
Indirect cost
p
Direct cost
q
Indirect cost
r
Indirect cost
s
Indirect cost
t
Direct cost
u
Indirect cost