Identify whether each of the costs is to be classified as direct or indirect. Define direct costs in…

Cost classifications—service company

A partial list of Gaelic Medical Center’s costs is provided below.

a. Operating room supplies used on patients (catheters, sutures, etc.).

b. Utility costs of the hospital.

c. Training costs for nurses.

d. Cost of maintaining the staff and visitors’ cafeteria.

e. Cost of intravenous solutions.

f. Cost of blood tests.

g. Cost of improvements on the employee parking lot.

h. Salary of the nutritionist.

i. General maintenance of the hospital.

j. Cost of patient meals.

k. Cost of laundry services for operating room personnel.

l. Depreciation on patient rooms.

m. Depreciation of X-ray equipment.

n. Cost of drugs used for patients.

o. Doctor’s fee.

p. Nurses’ salaries.

q. Overtime incurred in the Records Department due to a computer failure.

r. Salary of intensive care personnel.

s. Cost of X-ray test.

t. Cost of new heart wing.

u. Cost of advertising hospital services on television.

Instructions

1. What would be Gaelic’s most logical definition for the final cost object?

2. Identify whether each of the costs is to be classified as direct or indirect. Define direct costs in terms of a patient as a cost object.

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