Fixed and Variable Costs

Unlike fixed cost variable cost you have some room to play, variable cost is all about changing inputs around to change output. Or as defined by Thomas and Maurice “variable input is one for which the level of

Semi-fixed, where costs are fixed for a given level of activity but change in steps when activity levels exceed or fall below these given levels.

In our text (Smith, 2014) “The advantage of the direct method is that it is simple to apply, and the cost allocation amounts are easy to explain and can be viewed as the “tax” for each indirect service that is applied to each patient service department.” The direct method uses on step to allocate the costs of the general services departments to patient services department. In other words they would take all the assignable expenses and assign them to each department by a cost driver to determine indirect costs to the company. The one step and generalization makes it easy to explain, which gives it an advantage over the step down method, but at the same token those same reasons can be a disadvantage because it would not be as in

Cost drivers can be identified for each activity or cost category based on observation, discussions with management, simulations and statistical studies. The key is to determine the behavior of indirect costs with respect to activity or resource usage in each activity center (Leslie, 2009). These efforts have identified the eight cost drivers shown in Table 3.

Another variable cost to consider is continuing education and training for employees. Like any business, it is important for those in the health and fitness field to stay on top of current trends in the industry. From time to time it may be beneficial and necessary for full-time employees to attend seminars or training sessions to expand their knowledge in the industry. This is a good example of a cost that would not be incurred on a regular basis, but should be budgeted for at least once a quarter. Two variable costs that organizations overlook are office supplies and fuel. In every organization employees use office supplies. In many organizations fuel is needed for

All healthcare programs must maintain cost effectiveness in order to maintain the sustainability of the business. The management of a healthcare system must appraise and analyze all aspects of the services provided, especially care plans for diagnoses that require costly medical treatment. With the expansion of Medicaid benefits through the Affordable Care Act, administrators must be diligent in evaluating appropriate treatment options and the cost effectiveness of the treatment.

If the hospital focuses on processes, people and resources, this can be achieved at the most cost-effective way as possible. Manatt (2013)

Based on my understanding facilities have fixed expenses like their utilities, rent, malpractice insurance and the list can go on of the things that will remain the same every month despite the volume in patients. They also have variable expenses like payroll, marketing, supplies and the list can also go on in expenses that can vary each month depending of the volume of business the department is doing. I think no one is exempt of change so I will choose the variable expense department. A fixed expense departments might not change in production because everything stays the same and their job is not directly involved with situations that can make a budget vary. Variable expense departments, are usually the ones in direct contact with the patients

According to Sullivan (2013), “Budgeting is planning and controlling future operations by looking at the actual results with planned expectations (Sullivan, 2013).” When it comes to planning, the review of goals and objectives, by the nursing staff and organization, determines the priorities along with directing the efforts of the organization (Sullivan, 2013). In the planning phase, the organization needs to know the demographics of the population served, sources of revenue, and the statistical data, which will include number of admissions or patient appointments, average daily census and length of stay, patient acuity, and projected occupancy or volume base for ambulatory for procedure-based units (Sullivan, 2013). When everyone looks at the projected occupancy or volume based on the units, these units are the wage, supplies, staff, regulatory changes, and organization changes (Sullivan, 2013). Managements look at the past expenses as a starting point to developing the budget, which historically adjustments can be made during the actual budget

1. ABC Airlines has determined both the fixed and variable costs per flying hour associated with flying each of the 10 different types of aircraft in their fleet. How might this type of information be useful in determining the costs associated with flying different aircraft on specific routes?

All the costs by a company can be broken into two categories, fixed costs and variable costs. Costs that are independent of output are called fixed costs. Fixed costs remain constant throughout the relevant range and are usually considered sunk for the relevant range. Buildings and machinery are included inputs that cannot be adjusted in the short term. They are only fixed in relation to the quantity of production for a certain time period. The cost of all inputs is variable, in the long run.

3 variable costs indentified, they are power, operations, material. They are proportional to the revenue intake.

The essential relationship between fixed and variable costs is the same whether the budget is static or flexible. The key is that in the flexible budget, both fixed and variable costs are subject to change. In most cases,

Cost behavior refers to the way different types of production costs change when there is a change in level of production.

Cost behavior is one of the most important aspect which helps in analyzing the nature and responses of different costs. Generally the cost behavior is breakdown of costs into fixed and variable components. The cost behavior is usually analyzed with the help of CVP analysis. The cost behavior patterns are analyzed by cost-volume-profit analysis, including the calculation of a firm 's break-even point in units and sales dollars.