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Discussion Questions
DQ1
- Define direct costs.
- Define Indirect costs
- Why are direct and indirect costs important to management?
- Would you describe your current job today as a direct cost or a indirect cost? Why?
- 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
DQ2
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?
