Please respond with personal statement for the 4 statements. Each must be separately. Short respond of 50-70 words is ok for each post. And please respond as if you are talking to the writer listed at the end of each post and please be simple.
- When comparing the cost flows among service, merchandising, and manufacturing enterprises, merchandising is the most unique. Merchandising is buying a finished product and reselling it to make a profit. They have a higher purchase cost and contain a finished goods inventory. They have a much lower operational cost compared to service and manufacturing firms because there is less labor involved. Manufacturing firms have a purchase cost for bare materials and usually contain inventory of this base material, partially finished products and finished goods. They have a higher labor cost for the labor to make the finished products. Service firms, usually health care organizations, have higher direct patient expenses due to the salaries of care givers, and include other cost “such as registration, scheduling, billing, cash posting, and payroll” (Wallace, 2011). There is no inventory just services provided to the paying customers.
Health care has many aspects of each of these three firms that must work together to provide care for a patient. First and for most healthcare is a service firm that provides services for the patient. Manufacturing firms produce medical equipment and drugs from raw materials, and the merchandising firms sell these products to health care organizations so they can provide more effective services to the patients.
By. Eddie ====================================================d1
By. YvonService organizations provide a service. Majority of all healthcare organizations are service organizations. All operating costs are considered period costs. This means that at the time the costs occur, they are expenses (Epstein & Schneider, 2014). Depending on the type of service/customer, the financial report will reflect each individually when dealing with the revenues and expenses. An example would be the revenue and expense for performing a cholecystectomy would be different than an AVR repair. There isn’t an inventory cost because service organizations don’t sell the gauzes and drugs to the consumer, they sell the service and the gauzes and drugs are part of the service.
Merchandising organizations buy a product and resell that product. They act as the middle person from the manufacturer to the consumer. Merchandising costs are product costs (inventorial). This means they are an asset until they are sold. What they sell is the merchandise so the inventory is a separate cost from the labor and other expenses. Every other expense in the merchandising organization is treated as a period cost (Epstein & Schneider, 2014). Manufacturing organizations buy materials and change these materials into a product that they sell. The merchandising organization (factory) is basically divided into the business office and the factory. Costs that occur in the office is considered a period cost (much like a service organization). The factory end is considered a product cost. Their inventory is divided into yet-to-be-used (materials), partially used (work in process), and finished goods (material is now the product and ready for sale) (Epstein & Schneider, 2014).
Healthcare differs from other enterprises in that the costs of services are influenced directly on the reimbursement of the service. Although the healthcare agency will file that an iv insertion was $2000 and an Advil was $15, the accounts received is not at that price. There is a negotiating that goes on with insurance companies in regards to the agreed upon costs of service. The new trend is reference pricing.It is encouraged and rewarding for consumers to seek services at a healthcare organization that keeps their costs of services to or below a certain cost. These organizations are considered preferred providers (Landman, 2013).
By David ======================================================================d1
- There are two popular methods of allocating costs that we will discuss are: The Direct Method and the Step Method. The “direct method allocations are made from each service center to operating departments in proportion to activity performed for each… Once the service centers have their costs allocated, operating department overhead rates per unit of activity are calculated” (Epstein & Schneider, 2014). This method associates specific costs with specific departments within a healthcare setting. It is the simpler of the two methods and lays out what sections are producing what costs specifically. The overhead from each department is calculated and costs are individualized versus combined as a total or sum. In healthcare this can be specific to supplies of a certain section, housekeeping fees, administration, employees etc… Each department is essentially its own entity when it comes to cost. “The step method is a more accurate approach because it includes at least partial consideration of reciprocal services. It is slightly more complicated because it requires a sequence of allocations and reallocations conducted in a stepwise fashion. The order usually is based on the level of service provided by the service departments to each other, starting with the department that provides the most service to the others. An alternative is to allocate costs in descending order based on the amount” (Stinton, 2002). Departments within a healthcare setting are able to provide services to other departments. The healthcare setting is counted as a whole instead of individual departments as with the direct method. Departments are able to assist others.
By Katie ———————————————————————————————————–d2
- Our text discusses two common approaches for allocating the costs of service centers; the direct method and the sequential method.
“Direct method allocations are made from each service center to operating departments in proportion to activity performed for each” (Epstein, 2014). Meaning, if the work is performed for another service center, the cost will not be assigned to another service center. Once service centers have their costs allocated to the cost drivers pertaining to operating departments, overhead rates per unit activity can be calculated. For example, the surgery clinic surgery is divided into two areas: vascular surgery and general surgery. The vascular surgery section requires 2,000 sq feet of operating space and the general surgery clinic requires 4,000 square feet. The allocation base equals 6,000 sp feet. You can perform these allocations by dividing the service center costs by the cost driver and apply the resulting rate to the operating department usage amount. For example, building services would have a rate of $12.50 per sq foot ($75,000/6,000).
Another method is the sequential method. This method arranges service centers in sequence and their costs are allocated one after another. “The company allocates these costs to other service departments and to production departments. Once accountants allocate a service department’s costs, the department doesn’t receive any costs from other service departments” (Bank, 2016). When a service center receives its allocation, it will not receive any other allocation costs regardless of the fact that it uses resources from other service centers or not. “This process continues until all service centers’ costs have been allocated to operating departments. The number of allocation steps will equal the number of service centers” (Epstein, 2014).