Healthcare Finance Essay

Like with any household, businesses have some expenses that be the same each month, and others that fluctuate based on utilization. The mortgage, car note, and restitution premiums for the most part are the same throughout the year, un little the good bills, credit card bills, and cell phone bills may increase or decrease monthly based on usage. In health handle boldnesss, several types of comprise can be classified match to the amount of money of services provided. This can be referred to as activity, utilization, or book (Gapenski, 2012). savoir-faire for Business (2012) says, contumacious and variable expenses are the two main components of a companys total overhead expense (p.1). This paper go away address how be in healthcare organizations are classified according to their volume, and the importance of bell allocation. for healthcare providers, a follow involves a imaging use associated with providing or supporting a specific service (Gapenski, 2012, p. 148).Wi th firm and variable cost classification the purge of volume should be condition (Gapenski, 2012). In health care organizations, the actual future volume is changeful for the number of patient days, number of visits, number of enrollees, or the number of symptomatic tests (Gapenski, 2012). However, a general idea of the volume range over a particular period of time is usually known (Gapenski, 2012). hardened be are known and are not relate to volume within a relevant range (Gapenski, 2012). Unless the volume deviates excessively in a positive or negative direction, inflexible cost is not affected. Basu (2012) says, unbending cost remain constant within a specific range of activity. However, if volume increase or decrease past certain aims, set cost may change (p.1). For example, if a physicians slur staff can handle up to 10,000 patient visits, as farseeing volume stays within the relevant range of 8,000 to 10,000 defined by the office, the fixed costs remains uncha nged (Gapenski, 2012).Although most fixed costs such as equipment, weekly payroll, and rent are fixed for a period of time, an increase or decrease in volume in the future could mandate changes/adjustments to the fixed costs (Gapenski, 2012). Fixed costs acid not fluctuate with volume changes within a relevant range, but variable costs does. be that are directly related to volume are called variable costs (Gapenski, 2012, p. 150). Reference For Business (20120 says, Variable costs are those that respond directly and proportionately to changes in activity level or volume (p. 1). Using the physicians office higher up as an example, some of their variable cost could be gloves, tongue depressors, expendable exam gowns, and needles. As patient volume fluctuates, the cost associated with these supplies will alike fluctuate in relation to the volume changes. Because some costs are organizational and some are specific to a subunit, it is necessary to wee-wee a system that allocates co sts (Gapenski, 2012).A critical part of cost management at the subunit level is the narrowment, or allocation, of direct costs. equals allocation is essentially a pricing process within the organization whereby managers allocate the costs of one department to other departments (Gapenski, 2012, p. 188). Overhead cost such as, facilities management personnel, financial staffs, and house supportinging and maintenance personnel, must be allocated to the money generating departments of an organization (Gapenski, 2012). Cost allocation assigns the costs of an organization to the entities that incurred the costs. Cost allocation data allows the organization to make better decisions in, tracking, assigning, and controlling costs, as well as the offering and pricing of services. (Gapenski, 2012). Cost allocations can as well assist with reducing cost, because departments are held accountable for the full cost associated with tally their department. As a result, mangers will use costs sav ing methods to keep costs down, since evaluations, compensation, and promotions are sometimes dependent on economic results (Gapenski, 2012). cost can be fixed or it can be variable.Peavler (2012) say, Fixed costs are the costs associated with the product that have to be paid, unheeding of the volume of the product you sell. Variable costs are directly related to sales (p.1.). some cost are more or less predictable because they are independent of volume, while other costs are much less predictable because they are related to volume (Gapenski, 2012, p. 150). Whether fixed or variable, costs are usually allocated within an organization. Averkamp (2012) says, The goal is to assign the costs based on the root cause of the common cost instead of merely spreading the costs (p. 1). Knowledge and utilization of these concepts, helps with incumbent and future planning for an organizations financial success.ReferencesAverkamp, H. (2012). What is cost allocation?. P. 1. Retrieved from ht tp//blog.accountingcoach.com/what-is-cost-allocation/Basu, C. (2012). Effects a Sales Volume Increase or Decrease Will adjudge on Unit Fixed Cost. P. 1. Retrieved form http// lower-rankingbusiness.chron.com/effects-sales-volume-increase-decrease-uniGapenski, L. C. (2012). Healthcare Finance An submission to Accounting and Financial Management (5th ed.). Chicago, Illinois AUPHA Press / Health Administration Press.Peavler, R. (2012). Fixed and Variable Cost. P. 1. Retrieved from http//bizfinance.about.com/od/pricingyour product/qt/Fixed_Variable_CostReference for Business. (2012). Fixed and Variable Expenses. P. 1-4. Retrieved from http//www.referenceforbusiness.com/small/Eq-Inc/Fixed-and-Variable-Ex