ESSAY
Minimum of 450-500 words in length and properly sourced.
Question 1
1. Define direct costs.
2. Define Indirect costs
3. Why are direct and indirect costs important to management?
4. Would you describe your current job today as a direct cost or a indirect cost? Why?
5. Categorize the following as direct or indirect:
a. Managed care marketing expense
b. Real estate taxes
c. Liability insurance
d. Clinic telephone expense
e. Utilities (for the entire facility)
f. Emergency room medical supplies
Question 2
What is break-even analysis and why is it an important element in the discussion of operating leverage? In your response include a discussion on the break-even point.
Compare fixed and variable costs and explain the significance of the difference in making financial decisions. What does contribution margin (CM) mean?