EXERCISE 2-13 (15 MINUTES)

3. A number of different measures of activity could be used at a hospital.

Some hospitals use a measure called patient-days, which counts a pa-

tient in the hospital for one day as a patient-day. Fixed costs at a hospi-

tal include the rental and depreciation of buildings, administrative sala-

ries, utilities, insurance, and the costs of equipment. Variable costs in-

clude the costs of drugs and supplies and some labor costs.

Universities often use credit-hours or the total number of students en-

rolled as the measure of activity. Fixed costs for a university include the

costs of buildings, salaries, utilities, grounds maintenance, and so on.

Variable costs are minimal.

A measure of activity at an auto manufacturer might be the number of

cars produced. Fixed costs for an auto manufacturer include the costs of

buildings and equipment, insurance, salaries, and utilities. Variable costs

include raw materials and perhaps some labor.