PROBLEM 2-21 Variable and Fixed Costs: Subtleties of Direct and Indirect Costs I

Question

PROBLEM 2-21 Variable and Fixed Costs: Subtleties of Direct and Indirect Costs ILOS, L061 The Central Area Well-Baby Clinic provides a variety of health services to newborn babies and their parents. The clinic is organized into a number of departments, one of which is the Immunization Centre. A number of costs of the clinic and the Immunization Centre are listed below Example: The cost of polio immunization tablets. a. The salary of the head nurse in the Immunization Centre. b. Costs of incidental supplies consumed in the Immunization Centre. such as paper towels c. The cost of lighting and heating the Immunization Centre. d. The cost of disposable syringes used in the Immunization Centre. e. The salary of the Central Area Well-Baby Clinic's information systems manager. f The costs of mailing letters soliciting donations to the Central Area Well-Baby Clinic. The wages of nurses who work in the Immunization Centre. h. The cost of medical malpractice insurance for the Central Area Well-Baby Clinic. i. Depreciation on the fixtures and equipment in the Immunization Centre Required: For each cost listed above, indicate whether it is a direct or indirect cost of the Immunization Centre. whether it is a direct or indirect cost of immunizing particular patients, and whether it is variable or fixed with respect to the number of immunizations administered. Use the form shown below for your answer: Direct or Indirect Cost of the Immunization Centre Direct or Indirect Cost of Particular Patients Variable or Fixed with Respect to the Number of Immunizations Administered Item Description Direct Indirect Direct Indirect Variable Fixed Example: The cost of polio immunization ablets

Explanation / Answer

Direct or

Indirect Cost of

the Immunization

Center

Direct or

Indirect Cost

of Particular

Patients

Variable or Fixed

with Respect

to the Number

of Immunizations

Administered

The salary of the head nurse in the Immunization Center.

Direct

Indirect

Fixed

Costs of incidental supplies consumed in the Immunization Center, such as paper towels.

Direct

Indirect

Variable

The cost of lighting and heating the Immunization Center

Direct

Indirect

Fixed

The cost of disposable syringes used in the Immunization Center

Direct

Direct

Variable

The salary of the Central Area Well-Baby Clinic's information systems manager.

Indirect

Indirect

Fixed

The costs of mailing letters soliciting donations to the Central Area Well-Baby Clinic.

Indirect

Indirect

Fixed

The cost of medical malpractice insurance for the Central Area Well-Baby Clinic.

Indirect

Indirect

Fixed

Depreciation on the fixtures and equipment in the Immunization Center

Direct

Indirect

Fixed

Notes :

Direct or

Indirect Cost of

the Immunization

Center

Direct or

Indirect Cost

of Particular

Patients

Variable or Fixed

with Respect

to the Number

of Immunizations

Administered

The salary of the head nurse in the Immunization Center.

Direct

Indirect

Fixed

Costs of incidental supplies consumed in the Immunization Center, such as paper towels.

Direct

Indirect

Variable

The cost of lighting and heating the Immunization Center

Direct

Indirect

Fixed

The cost of disposable syringes used in the Immunization Center

Direct

Direct

Variable

The salary of the Central Area Well-Baby Clinic's information systems manager.

Indirect

Indirect

Fixed

The costs of mailing letters soliciting donations to the Central Area Well-Baby Clinic.

Indirect

Indirect

Fixed

The cost of medical malpractice insurance for the Central Area Well-Baby Clinic.

Indirect

Indirect

Fixed

Depreciation on the fixtures and equipment in the Immunization Center

Direct

Indirect

Fixed

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