COST CENTRES

COST CENTRES

This paper describes and explains what cost centers are and the benefits of establishing them in an organization. It will also provide the different expenses that Metropolis Health System will group under the different cost centers that have been set up at the hospital; the intensive care unit, the laboratory and laundry. Additionally, the paper goes further to classify the different expenses of The Metropolis Health System’s Rehabilitation and Wellness Center into different cost centers and illustrate the classification in a cost expense worksheet.

Cost Centers

In any organization, there are some costs likely to be incurred. These parts of the organization where the costs occur and for which are budgeted for are referred to as cost centers. A cost center generally refers to an expense that is incurred by an organization ion its day to day activities but does not exactly contribute to the profit of the organization. The cost centers have no obligation to generate any form of revenue for the organization.

As much as the cost centers do not earn the organization profit, they indirectly add to the revenues made in the company and without these cost centers the company is likely to fail in its profit making. For instance the research department in the organization is a cost center. The expenses spent in department will in turn lead to innovation within the organization which in turn would mean bigger better profits for the organization in future. Generally the expenses can be divided into three cost centers. The salaries, supplies and education cost centers.

Some of the advantages of having cost centers in the organization are that it helps to check on any unexpected movements in cost in the organization and the cost centers help in cost control such that it provides the organization with the opportunity compare the costs for different cost centers at different times. Additionally, keeping a cost center in the organization can help the management in assessing the variation of costs in the different departments over time.

Worksheet 1

The Metropolis Health Cost Centre Worksheet

Intensive Care Unit Laboratory Laundry

Drugs Requisitioned Clerical Salaries Detergents and Bleach

Nursing Salaries Pathology Supplies Uniforms

Clerical Salaries Repairs The Metropolis Health System’s Rehabilitation and Wellness

Considering the kind of organization and its operation, the cost centers to be established for Metropolis Health Systems Rehabilitation and Wellness Center are still just three; the supplies, salaries and the education cost centers.

Under the salaries cost center the expenses to be put here include the occupational therapist salary, the physical therapist salary, the pulmonary rehab salaries, the patient education coordinator salary, the pulmonary rehab salaries and the nursing supplies. Under the education cost center the expenses to be established here includeany form of expenses incurred in the course of educating the employees or any expenses incurred in training of the patients in the hospital. Lastly, the expenses to be put under the supplies cost center include the pulmonary rehab supplies, the training supplies, the clerical office supplies, the cardiac rehab supplies, the physical therapist supplies and the occupational therapist supplies. These have been clearly demonstrated in worksheet

Worksheet 2

The Metropolis Health System’s Rehabilitation and Wellness Center Cost Center

Salaries Supplies Education

Nursing Salaries Nursing Supplies Employee Education

Physical Therapist Salaries Physical Therapist Supplies Occupational Therapist Salaries Occupational Therapist Supplies Cardiac Rehab Salaries Cardiac Rehab Supplies Pulmonary Rehab Salaries Pulmonary Rehab Supplies Patient Education Coordinator Salary Training Supplies Clerical Office Supplies