Hca/270 Appendex D

Topics: Costs Pages: 2 (290 words) Published: June 25, 2011
Axia College Material
Appendix D

Costs and Cost Control

Part I—Costs: Briefly define the following terms, and provide examples where appropriate.

Term| Definition and example|
Direct costs| An expense that can be traced to a specific cost center or object. An example of this would be labor costs or costs for materials. | Indirect costs| An expense that is incurred in joint usage and is hard to track to one specific cost center. An example of this would be cost for advertising, maintenance, and security. | Fixed costs| A cost that is periodic and unchanging for the most part. An example of this is wages, rent and insurance. | Variable costs| A cost that varies depending on the output and sales of the company. Examples of this would be raw materials and energy usage. | Step-fixed costs| Fixed cost that increases to a new level in a step format with the changes in activity and usage. An example of this would besales and administrative expenses.|

Part II—Centers: Briefly define the following terms, and provide an example of each.

Term| Definition and example|
Responsibility centers| Units in an organization that has control over cost, revenue, and investment funds. An example of this is a human resources and purchasing. | Revenue centers| Unit in an organization that is responsible for generating revenue for the company. An example of this is the sales department. | Cost centers| A part of the organization that does not produce or add money to the company but is still crucial to running that company. an example of this is the marketing department and customer service. | Shadow cost centers| Shadow cost centers provide detailed reports for cost center departments, division, and extensions. An example of this is depreciation of equipment.

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