Expenses are the costs that relate to the earnings of revenue. Another way to think of expenses is as the cost of doing business. Just as revenues represent the inflow into the organization, so do expenses represent the outflow- a stream of expenditures flowing out of the organization.
Direct cost can be specifically associated with a particular unit or department or patient. The critical distinction for the manager is that the cost is directly attributable. Remember direct cost can be traced. Indirect cost, on the other hand, cannot be specifically associated with a particular cost object.
· Complete Practice Exercise 5–1: Grouping Expenses by Cost Center
· Complete Practice Exercise 6–1: Identifying Direct and Indirect Costs
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