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Ronnicki (week 5 response)

What are the differences between direct and indirect costs?

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 According to Penner (2017), “Direct costs are generated for the provision of goods and services” (p. 75). For example, the costs associated with the supplies, equipment and staffing needed to provide direct patient care. Indirect costs are typically overhead costs which are needed but not associated with direct patient care. For example, facility rental or purchase, utility services, clerical, and computer support (Penner, 2017).

 What is the difference between fixed and variable costs?

 According to Penner (2017), costs that do not change are considered fixed costs and most often have a contract of some sort that guarantees the cost for a period, typically long-term, that provide a guarantee of the cost for the goods or services. Some examples of fixed costs include facility rent or mortgage payment, employee salaries and costs for benefits. Variable costs differ in that they are not fixed, and associated costs can fluctuate and can relate to the fluctuating volume of business. Examples of variable costs include typical operational costs, such as patient supplies, educational materials, diagnostic supplies, and medications (Penner, 2017).   

 Is staff salary fixed or variable?

 To answer this question, one must first know if we are discussing an hourly or salaried employee. An hourly paid employee would be considered as a variable salary. The hourly employee is paid depending on the number of hours work and their paycheck may fluctuate from one week to the next. However, a salaried employee is paid a fixed amount no matter how many hours he or she works (Penner, 2017).  

 If your volume goes up, you need more staff and more overtime. Is this expense fixed or variable?

 According to Penner (2017), when the volume or units of service (UOS) changes it affects the total variable costs. For example, healthcare settings base the number of FTEs on the UOS. However, when the UOS changes the fixed costs in the healthcare setting does not change but the utilization of staff changes, which makes it a variable expense. For example, when there is an influx of volume, increased utilization of overtime, PRN staff and travel nurses can occur and is considered a variance (Penner 2017). 

 What is the true cost of a FTE? What components must be taken into consideration?

 According to Penner (2017), a full time equivalent (FTE), is a standard measurement used for an hourly employee. The wage the hourly employee receives at the time of hiring is less than the actual cost of the FTE. There are many components when onboarding an FTE. An employee is hired with additional expected costs which have been included in the FTE. For example, the employees wage, orientation costs, benefits, sick time, and vacation time must all be considered into the costs of a single FTE (Penner, 2017). Despite the true cost of an FTE, a study performed discovered the higher number of RN’s /FTEs utilized in caring for patients post lobectomy improved patient outcomes significantly. The increased utilization of FTE’s decreased the patient’s mortality rate, length of stay, and readmission rate which overall decreased costs and outcomes for the patient. The organization considered the increase utilization of FTEs as successful in improving patient outcomes however struggle with the increased costs to the organization (Ross et al., 2021).  

 References

Penner, S. J. (2017). Economics and financial management for nurses and nurse leaders (3rd ed.). Springer Publishing Company.

Ross, H. I., Jones, M. C., Hendriksen, B. S., & Hollenbeak, C. S. (2021). Nurse staffing and outcomes for pulmonary lobectomy: Cost and mortality trade-offsHeart & Lung50(2), 206–212. Retrieved October 31, 2021, from  https://doi.org/10.1016/j.hrtlng.2020.12.001

Alexie (week 5 response)

What are the differences between direct and indirect costs?

Direct cost are financial expenses that a company or an organization can particularly attach to a specific object, product, department, unit, equipment and more.

Indirect cost is can be the resources and provisions needed for a company’s commonplace actions are samples of indirect costs.

What is the difference between fixed and variable costs?

The difference between fixed and variable cost, can be described in my opinion, fixed costs do not have any change with activities volume, meanwhile variable costs do change with activity volumes. Fixed cost can be salaries, health insurance, variable can be materials, supplies, production.

Is staff salary fixed or variable?

I consider my salary to be fixed, when wages are paid to staff as their regular hours is fixed, when we get paid overtime, weekend premiums, nigh shift differential this can be considered variable pay.

If your volume goes up, you need more staff and more overtime. Is this expense fixed or variable?

I volume goes up and the health organization needs more staff and over time to comply with the demand at the time, this can be variable pay. When an organization or company has to hire, pay overtime, travel, lodging even meals this is variable and not fixed.

What is the true cost of a FTE? What components must be taken into consideration?

The method commonly used is the Full Time Equivalent (FTE) method. The FTE method is used to calculate workloads with various task variations (Wahyuni et al., 2019).  All costs and expenses for any employee executing actions, including commissions, salaries, bonuses and more.

 Reference

Penner, S. J. (2017). Economics and financial management for nurses and nurse leaders (3rd ed.). Springer Publishing Company.

Wahyuni, N., Gunawan, A., Ferdinant, P. F., & Fitriyanti, E. (2019). Designing employee workload calculation based on java-based full time equivalent method. IOP Conference Series: Materials Science and Engineering, 673, 012098. https://doi.org/10.1088/1757-899x/673/1/012098

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