Question

Cost classifications for a service company PR 1-3A Obj. 2 A partial list of Foothills Medical Center's costs follows: A. Cost of patient meals 8. 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 General maintenance of the hospital I. 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 Cost of laundry services for operating room personnel P. 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 rooms Instructions 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 direct or indirect. For purposes of classifying each cost as direct or indirect, use the patient as the cost object.

Answer 1

1. The most logical definition for the final cost object = Patient per day.

The other definition for the final cost object = room per day or per bed or per operation

2. Following is the costs classified into Direct or Indirect Cost:

Nature of the costs	DIRECT	INDIRECT
Cost of Patients Meal	Direct
Nurses Salarie		Indirect
Depreciation of xray equipment		Indirect
Utility cost of hospital		Indirect
Salary of the intensive care peronnel	Direct
Cost of xray test	Direct
Operating rooms supplies used for patients	Direct
Salary of nutritionist	Direct
General maintenace of hospitaL		Indirect
Cost of new hear wing		Indirect
Cost of drugs used for patients	Direct
Cost of advertising hospital service TV		Indirect
Cost of improvement of employees parking lot		Indirect
Cost of Intravenous solutions used for patients	Direct
Doctors's Fees	Direct
Overtime in patients records department due to computer failure		Indirect
Cost of blood test	Direct
Cost of maintaining the staff and visitors cafitaria		Indirect
Depreciation of patient rooms		Indirect