Hca 270 Appendix D

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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| These are costs that incurred directly as a result of providing a specific good or service. (Example) A patient is in the hospital and all of the services are included in the cost.| Indirect costs| These are those that cannot be tied directly to the patient as they stay in the hospital. (Example) The patient does not pay for the administrator to be there (working), food and laundry services or fixed costs.| Fixed costs| These are the services that do not vary as service volume varies. (Example) rent and utilities are set per month regardless of change. | Variable costs| This is change with patient volume. (Example) The cost of a syringe may change depending on patient volume, also the nurse’s pay can change as well. | Step-fixed costs| These are costs that are fixed over some range of service volume but rise to new levels for a higher range of service volumes. (Example) Three registered nurses may be all that is needed if there are only five patients on the floor, but four registered nurses will be needed if there are six to ten patients on the floor.|

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

Term| Definition and example|
Responsibility centers| Here is where cost occurs and there is a budget. (Example) A subunit of the larger organization that is responsible for some type of budget.| Revenue centers| These are charged with both an expense and a revenue budget. (Example) An organization revenue center, collectively, have the obligation to meet through their production of revenues, the cost of all centers and of all revenue centers.| Cost centers| These have no revenue budgets and no obligation to earn revenue for the organization. (Example) Administration is always a cost center, as is...
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