Cost centers are one method of grouping expenses. For example, a nursing home may consider the Admitting Department as a cost center. In that case, the expenses grouped under the Admitting Department cost center may include:

Administrative and Clerical Salaries

Admitting Supplies

Dues

Periodicals and Books

Employee Education

Purchased Maintenance

Example: Grouping Expenses by Cost Center The Metropolis Health System groups expenses for the Intensive Care Unit into its own cost center. Laboratory expenses and Laundry expenses are likewise grouped into their own cost centers.

Required

1. Set up a worksheet with individual columns across the top for the three cost centers: Intensive Care Unit, Laboratory, and Laundry.

2. Indicate the appropriate cost center for each of the following expenses:

Drugs Requisitioned

Pathology Supplies

Detergents and Bleach

Nursing Salaries

Clerical Salaries

Uniforms (for Laundry Aides)

Repairs (parts for microscopes)

(Hint: One of the expenses will apply to more than one cost center.)

Headings for your worksheet:

Drugs Requisitioned, Intensive Care Unit, Laboratory, and Laundry

The solution to Example.

Intensive Care Unit Laboratory Laundry

Drugs requisitioned X

Pathology supplies X

Detergents and bleach X

Nursing salaries X

Clerical salaries X X X

Uniforms (for laundry aides) X

Repairs (parts for microscopes) X

Note: If no clerical salaries are assigned to Laundry, this is an acceptable alternative solution.

Now it's Your Turn! Answer the question below.

The Metropolis Health Systems Rehabilitation and Wellness Center offers outpatient therapy and return-to-work services plus cardiac and pulmonary rehabilitation to get people back to a normal way of living. The Rehabilitation and Wellness Center expenses include the following:

Nursing Salaries

Physical Therapist Salaries

Occupational Therapist Salaries

Cardiac Rehab Salaries

Pulmonary Rehab Salaries

Patient Education Coordinator Salary

Nursing Supplies

Physical Therapist Supplies

Occupational Therapist Supplies

Cardiac Rehab Supplies

Pulmonary Rehab Supplies

Training Supplies

Clerical Office Supplies

Employee Education

Required

1. Decide how many cost centers should be used for the above expenses at the Center.

2. Set up a worksheet with individual columns across the top for the cost centers you have chosen.

3. For each of the expenses listed above, indicate to which of your cost centers it should be assigned. Follow the same format as the sample above.