Problem: Any cost that a health care manager can authorize or directly influence is a controllable cost. Examples of non-controllable costs for the business include: taxes, interest, costs mandated in the fulfillment of contracts, costs of having the buildings ADA accessible, costs associated with complying with all minimum standards for habitation and use of buildings, costs associated with purchasing and maintaining every piece of equipment required for contracts, and costs associated with complying with mandated safety levels. Virtually every other expense the health care manager can influence the amount of the expense by controlling the level of the activity.
Q1. Which costing system would be more efficient when direct materials and direct labor costs are high, and overhead costs are low and why?
Q2. Which costing system would be more efficient when direct labor costs and direct materials are low, and overhead is high and why?
Q3. Explain how the supply chain and the macroeconomic environment of the health care business fit in with your calculations?