Question

Cost behavior is the term used to summarize the impact of costs that are influenced by volume. On a financial statement, these costs are identified as variable costs. Understanding the role of both fixed and variable costs in a health care organization is key to targeting profitability centers.

Assume the role of a financial consultant. You have been hired by a small non-profit hospital, struggling with profitability. You have been given full access to all financial and operational information to perform your research and analysis.

• Create a one-page outline of the work you will be performing. This outline will be given to the CFO.
• On a separate page, using fictional information, depict the hospital's cost behavior.
  • You may include graphics, such as pie charts or graphs, to illustrate.
  • Cost drivers should be clearly defined
  • One-page in length
• On a separate page, provide a recommendation summary for the CFO. This should include specific areas of concern to address, as well as areas of strength to continue supporting. Your wording should be professional and concise.
• Include a minimum of three references in APA style on a separate page
• Submit all four pages as part of one Word document

Answer 1

Fixed and variable costs play an important role in the company or any other organization/Institution. All the cost broken by the company is further divided into fixed and variable costs. Fixed costs are independent of output whereas variable costs vary accordingly. Sometimes it is also known as mixed cost.

Total Variable Cost Cost Fixed cost Output

Following is the list of work that will be submitted to CFO:

• analysis cost behavior approaches
• patient to the compensation effectively
• prepare a separate cost sheet for all tiny expenses

Hospital's cost behavior approaches totally depend upon the method of spending expenses and finding the way to hide the unbearable cost. The majority of cost provided under hospital is related to equipment, building. labor and fixed overhead. The maintenance charges on all these factors are really high.

Hospital's cost behavior is a relationship of costs and volume of services rendered is known as cost behavior approach. It is sometimes known as the underlying cost structure. If the hospital is aware of its cost behavior then CFO can forecast the cost behavior at a different level of operations.

Recommendation Summary:

• An explanation of fixed and variable costs for decision making purpose
• Procedure to find out the hidden costs of hospital
• Decision-making power in case of shutdown and downfall
• An overview of elements required to cut down the waste expenses in the hospital
• Be focused on service rendering elements  
• Avoid factors that affect the performance of hospital and economic forums