Choose ONE (1) question below to discuss and then respond to TWO (2) of your classmates answers (Try not to repeat others answers). Include the question with your response.

1. Explain why cost management and cost allocation is important information for a healthcare manager?
2. What are indirect or overhead costs? Discuss one method in which overhead costs can be allocated?
3. What is the degree of operating leverage? What does it mean if one firm has a measure of 40% and the other has a measure of 50%, which is better?
4. Define fixed cost and provide an example of a fixed cost in a healthcare setting.
5. Define variable cost and provide an example of a variable cost in a healthcare setting.

Make sure you are properly citing your source(s) and providing your reference(s) for information you obtain from another source. Please review the Discussion Expectations and Grading posting if you have any questions regarding answering the discussion question and/or responding to your peers.

SOLUTION

Hello Class,

Variable costs are important components of a healthcare organization’s financial structure because they represent expenses that change directly with the number of services supplied. These costs are closely related to the healthcare facility’s operational operations, so as patient volume increases, variable costs rise, and as patient volume drops, these costs decline. This distinguishes variable costs from fixed expenses, which are constant regardless of the degree of service supplied. A variable cost in healthcare is the cost of medical supplies (Reiter & Song, 2021). Medical supplies include bandages, gloves, syringes, drugs, and other consumables that are used directly in patient care. For example, a hospital’s syringe spending will rise in proportion to the number of injections provided. Similarly, the cost of pharmaceuticals will vary according to the number of prescriptions filled (Reiter & Song, 2021). During a period of high patient admissions, such as a flu outbreak or a pandemic, the demand for these supplies will skyrocket, resulting in a huge increase in the hospital’s variable expenses.

Kindly click the purchase icon above to buy the full solution at $10