Question

Northwest Hospital is a full-service hospital that provides everything from major surgery and emergency room care to outpatient clinics.

Required:
For each of the following costs incurred at Northwest Hospital, indicate whether it would most likely be a direct cost or an indirect cost of the specified cost object by listing the number and a "D" for direct or an "I" for indirect. For example: 1D, 2D, etc.

a. The wages of pediatric nurses / The pediatric department
b. Prescription drugs / A particular patient
c. Heating the hospital / The pediatric patient
d. The salary of the head of pediatrics / The pediatric patient
e. The salary of the head of pediatrics / The particular pediatric patient
f. Hospital chaplain's salary / A particular patient
g. Lab tests by outside contractor / A particular patient
h. Lab tests by outside contractor / A particular department

Answer 1

Northwest Hospital

aD

bD

cI

dI

eI

fI

gD

hD

Step-by-step explanation:

Direct costs are costs that are directly traceable to the production of goods and services and can be identified with a unit of production. While direct costs are usually variable, some direct costs can be fixed.

Indirect costs are costs that support the operation of the company. They cannot be traced to any unit of production. Similarly, some indirect costs are variable while others are fixed.