Question

*I have bolded and capitalized the 5 categories.

Doctors Beyond Borders (DBB) operates health programs around the world. It has a CENTRAL STAFF of 100 people who administer its world-wide program DBB’s central operation buys and distributes all of the supplies used in its various country operations. DBB’s COUNTRY DIRECTOR for Nigeria and HER STAFF runs 20 clinics around the country. At the clinic level, DOCTORS AND NURSES hired under two-year contracts, administer medical treatment free of charge to the local population. They use SUPPLIES shipped to them by DBB’s central staff based on the number of patients treated at each clinic.

a) From the perspective of the program director for Nigeria, for the coming year which of the five categories (underlined in bold above) of expenses are: (Write the general category of the expenses next to the categories below)

Direct costs:

Indirect costs:

Fixed costs:

Variable costs:

b) Which of the direct expenses for Nigeria would be classified as indirect from the perspective of a clinic director?

Answer 1

a). From the perspective of the program Director for Nigerial:
Direct Costs = Supplies, Cost of Doctors and Nurses at Clinic Level because these costs are incurred on the basis of No. of Clinics and are directly associated with the health program at the clinic hence these are direct costs.
Indirect Costs = Cost of Country Director and her staff because it is not for single clinic but for 20 clinics around the country hence indirect cost.
Fixed Costs = Cost of Country Director and her staff because it does not vary with the changes in clinics.
Variable Costs = Supplies, Cost of Doctors and Nurses at Clinic Level because it directly depends on the no. of clinics hence it is variable cost per clinic basis.

b). Direct expenses for Nigeria which would be classified as indirect from the perspective of a clinic director are cost of Doctors and nurses in the clinic because these cost are not directly ascertainable to a particular patient because services of these are provided to every patient and cannot be identified for a specific patient in the clinic, while the cost of supplies are identifiable to every specific patient hence suppliers remain direct cost.