Draw a graph of the cost behavior for each of the following costs incurred by the Mountain Summit Hospital. The hospital measures monthly activity in patient days. Label both axes and the cost line in each graph.
1. The cost of food varies in proportion to the number of patient days of activity. In January, the hospital provided 3,000 patient days of care, and food costs amounted to $24,000.
2. The cost of salaries and fringe benefits for the administrative staff totals $12,000 per month.
3. The hospital’s laboratory costs include two components: (a) $40,000 per month for compensation of personnel and depreciation on equipment and (b) $10 per patient day for chemicals and other materials used in performing the tests.
4. The cost of utilities depends on how many wards the hospital needs to use during a particular month. During months with activity under 2,000 patient days of care, two wards are used, resulting in utility costs of $10,000. During months with greater than 2,000 patient days of care, three wards are used, and utility costs total $15,000.
5. Many of the hospital’s nurses are part-time employees. As a result, the hours of nursing care provided can be easily adjusted to the amount required at any particular time. The cost of wages and fringe benefits for nurses is approximately $2,500 for each block of 200 patient days of care provided during a month. For example, nursing costs total $2,500 for 1 to 200 patient days, $5,000 for 201 to 400 patient days, $7,500 for 401 to 600 patient days, and so forth.