| Course | HC 306 Healthcare Finance |
|---|---|
| Unit | Unit 6 |
| Paper type | Cost behavior worksheet |
| Length | About 970 words, 6 pages |
| Format | APA 7 student paper |
| School | Herzing University |
| Program | BS in Healthcare Administration |
| Updated | October 2026 |
Free sample paper for HC 306 Unit 6
Fixed, Variable and the Costs in Between: A Cost Behavior Worksheet for a Clinic Laboratory at 18,000 and 24,000 Tests a Year
Student Name
Health Care Administration, Herzing University
HC 306: Healthcare Finance
Instructor Name
February 19, 2026
Fixed, Variable and the Costs in Between: A Cost Behavior Worksheet for a Clinic Laboratory at 18,000 and 24,000 Tests a Year
The Department and Its Unit of Output
Bayside Family Medicine, the composite Florida clinic, runs a small in-house laboratory: a blood draw station and a chemistry and hematology analyzer that together perform the clinic's routine tests. The unit of output is one billable test result, such as a basic metabolic panel or a complete blood count. Last year the laboratory performed 18,000 tests. The clinic is considering an agreement to perform tests for a neighboring pediatric practice, which would add about 6,000 tests a year. This worksheet sorts each laboratory cost into fixed, variable or mixed, according to whether it moves when the number of tests moves, then calculates cost at both volumes.
Fixed Costs
These do not change with the number of tests within the range the laboratory can handle.
| Cost | Annual amount | Why it is fixed |
|---|---|---|
| Share of clinic rent for laboratory space | $14,400 | Set by the lease, regardless of volume |
| Analyzer lease | $18,000 | Flat monthly lease payment |
| Laboratory certificate fee and proficiency testing enrollment | $2,600 | Required to operate at any volume (42 C.F.R. § 493.801) |
| Medical laboratory technician, salaried, with benefits | $58,000 | One full-time position covers the current and proposed volume |
| Total fixed | $93,000 |
Variable Costs
These rise in proportion to the number of tests.
| Cost | Per test | Why it is variable |
|---|---|---|
| Reagents and calibration material consumed per result | $2.40 | Each result uses a set amount |
| Tubes, needles and draw supplies, about one draw per 2.5 tests | $0.24 | Each draw uses one set |
| Total variable, before mixed costs | $2.64 |
Mixed Costs, Split Rather Than Guessed
Two costs behave partly as fixed and partly as variable: the phlebotomist's hours, which have a guaranteed base but extend on busy days, and utilities, which have a base charge plus usage. Rather than placing them in whichever column looks tidier, they are combined and split with the high-low method, using the last 12 months of data.
Highest-volume month: 1,850 tests, mixed costs $4,310. Lowest-volume month: 1,200 tests, mixed costs $3,725. Variable rate = ($4,310 − $3,725) ÷ (1,850 − 1,200) = $585 ÷ 650 = $0.90 per test. Fixed portion = $4,310 − ($0.90 × 1,850) = $4,310 − $1,665 = $2,645 a month, or $31,740 a year. The same fixed portion results from the low month: $3,725 − ($0.90 × 1,200) = $2,645.
Adding the split to the earlier totals: total fixed costs = $93,000 + $31,740 = $124,740 a year; total variable cost = $2.64 + $0.90 = $3.54 per test.
The Arithmetic at Two Volumes
At the current 18,000 tests: total cost = $124,740 + ($3.54 × 18,000) = $124,740 + $63,720 = $188,460. Cost per test = $188,460 ÷ 18,000 = $10.47, of which fixed cost is $6.93 and variable $3.54.
At the proposed 24,000 tests: total cost = $124,740 + ($3.54 × 24,000) = $124,740 + $84,960 = $209,700. Cost per test = $209,700 ÷ 24,000 = $8.74, of which fixed cost is $5.20 and variable $3.54.
Total cost rises by $21,240, but cost per test falls by $1.73, because the same fixed costs are spread over more tests. The variable cost per test does not change. This is the pattern the course text describes: fixed cost per unit falls as volume rises, while variable cost per unit stays constant (Pink & Song, 2020).
Checking the Split Against All Twelve Months
Because the high-low method relies on two months, the finance analyst also fitted a simple regression of monthly mixed cost on monthly test volume across all 12 months. The regression gave a variable rate of $0.86 per test and a fixed portion of about $2,700 a month, with volume explaining about 91% of the month-to-month variation in mixed cost. The two methods agree closely. Using the regression figures instead would change total cost at 18,000 tests by less than $200 and cost per test by about a cent, so the conclusions below do not depend on which method is used. Where the two methods had disagreed more, the regression would be preferred, because it uses every month rather than the two extremes.
What It Means for the Decision
The laboratory's blended payment is about $12.10 per test across payers. Each additional test therefore contributes $12.10 − $3.54 = $8.56 toward fixed costs. The laboratory breaks even at $124,740 ÷ $8.56, about 14,570 tests a year, so it is already profitable at 18,000. The 6,000 added tests would contribute about 6,000 × $8.56 = $51,360 a year, if the neighboring practice's payers pay a similar blended rate, and would lower the cost per test for all of Bayside's own patients.
Two cautions apply. First, the fixed costs are fixed only within a range. The technician and the analyzer can handle about 26,000 tests a year; beyond that, a second analyzer lease or added staff would raise fixed costs in a step, and the analysis would need to be redone. At 24,000 tests the laboratory would be close to that limit, leaving little room for growth. Second, the high-low method uses only two months and can be distorted if either month was unusual; a regression on all 12 months would be more reliable, and the clinic's finance analyst should run it before the agreement is signed. The method and its limits follow standard cost accounting practice (Datar & Rajan, 2021).
Pricing the Pediatric Practice's Tests
If the clinic performs tests for the neighboring practice under a direct billing arrangement, charging the practice a flat price per test rather than billing each patient's insurer, the worksheet sets the floor and the target for that price. The floor is the variable cost, $3.54: any price above it adds to the clinic's margin in the short run. But a price near the floor would leave the clinic carrying the whole risk of the step in fixed costs if volume grows past the analyzer's capacity. A price of about $9.00 per test would cover the variable cost and contribute about $5.46 a test toward fixed costs, about $32,760 a year at 6,000 tests, while likely remaining below what the practice now pays an outside reference laboratory. Before quoting a price, the clinic should confirm that any direct billing arrangement complies with the payment rules of the practice's payers and with laws on referral arrangements, which is a question for counsel rather than for this worksheet.
References
Condition: Enrollment and testing of samples, 42 C.F.R. § 493.801 (2025).
Datar, S. M., & Rajan, M. V. (2021). Horngren's cost accounting: A managerial emphasis (17th ed.). Pearson.
Pink, G. H., & Song, P. H. (2020). Gapenski's fundamentals of healthcare finance (3rd ed.). Health Administration Press.
HC 306 Unit 6 instructions, in plain terms
In Unit 6 you build a cost behavior worksheet for one clinical department. You will define the unit of output, classify fixed, variable and mixed costs, split mixed costs with a method, calculate total and unit cost at two volumes, check the split and apply the results to a decision. Students often ask how to handle costs that are partly fixed. Split them using the high-low method on monthly data, then check with a regression across all months. Keep fixed costs fixed only within the relevant range. Show how cost per unit falls as volume spreads fixed costs. Use contribution margin to find break-even and to set a price for outside work.
How this HC 306 Unit 6 example is built
The worksheet opens with the laboratory, its equipment and its measure of output. A fixed cost table lists leases, salaries, licenses and proficiency testing. A variable cost table lists reagents, controls and supplies per test. The mixed cost section uses the highest and lowest months to separate the phlebotomist's base and extra hours and the utilities base charge. The arithmetic section calculates total and unit cost at 18,000 and 24,000 tests. The check section compares the high-low split with a regression on all twelve months. The decision section shows each test contributing $8.56 toward fixed costs and the break-even volume. The final section sets a minimum price for tests performed for the pediatric practice.
Where the points sit in the HC 306 Unit 6 rubric
Herzing's rubric for a cost behavior worksheet typically covers the unit of output, classification, the mixed cost method, calculations at two volumes, validation and application. Splitting mixed costs with a stated method carries the largest share, since guessing at them distorts every later figure. Output points reward a clear unit. Classification criteria look for reasons for each cost's category. Calculation credit goes to total and unit cost shown at both volumes. Validation points reward a regression or other check. Application should use contribution margin for break-even or pricing. Datar and Rajan's cost accounting text, Gapenski's healthcare finance text and CLIA proficiency testing rules support the worksheet.
HC 306 Unit 6 help before you submit
Cost worksheets in HC 306 Unit 6 commonly lose points by forcing mixed costs into fixed or variable without a method. Another frequent problem is calculating unit cost at one volume only. Students often treat fixed costs as fixed at any volume. The high-low split is not checked. Contribution margin is confused with profit. Break-even is skipped. Pricing for outside work ignores variable cost. Regulatory costs, such as proficiency testing, are missed. Step costs, such as a second phlebotomist once volume passes a certain level, are ignored when the higher volume is tested. Finally, show how unit cost changes with volume, because graders reward a worksheet a manager could use to decide whether to take on more tests.
Get a HC 306 Unit 6 example written to your instructions
Send the Unit 6 instructions and the rubric from your HC 306 classroom, plus the department and the unit of service you have been given. We write a custom example that classifies each cost line with its reason, splits the mixed ones and runs the arithmetic at two volumes, back in 24 to 48 hours. The first custom sample is free.
More HC 306 papers and healthcare administration samples
- HC 306 Unit 1: Payer type comparison table
- HC 306 Unit 2: Patient responsibility calculation
- HC 306 Unit 3: Revenue cycle trace
- HC 306 Unit 4: Charge and reimbursement comparison
- HC 306 Unit 5: Financial statement interpretation
- HC 306 Unit 7: Departmental budget worksheet
- HC 306 Unit 8: Finance summary report
- HA 620 Unit 6: Capital request proposal
- HA 625 Unit 6: Fraud and abuse audit plan
- HA 630 Unit 6: Digital campaign plan
- HA 635 Unit 6: Discipline case file
HC 306 Unit 6 questions, answered
Are nurse salaries fixed or variable?
It depends on how the department staffs, which is why the reason column matters more than the label. A salaried manager whose pay does not move with census behaves as fixed. Hours added shift by shift as volume rises behave as variable, and a core team topped up on busy days is the classic mixed cost. Say which arrangement you assumed and classify from that.
How do I split a mixed cost?
Take the simplest defensible method and state it. Comparing total cost at a high-volume period against a low-volume one gives you a rate per unit for the variable part, and the remainder is the fixed portion. Where your instructions name a method, use theirs. Whatever you choose, show the two figures you worked from so the split can be checked rather than accepted.
Does the worksheet need a real department?
A described one works fine and is often cleaner, because you control which cost lines appear and can keep the list short enough to classify properly. Name a service, a rough size and a plausible set of costs, and mark the figures as illustrative. If your instructions point at a real department, keep budget documents and anything internal out of the submitted file.
Where can I find a free HC 306 Unit 6 sample paper?
Read the complete HC 306 Unit 6 cost behavior worksheet here at no charge, clinic lab costs split into fixed, variable and mixed with break-even and pricing. Ask for a custom worksheet for another department.
What is the high-low method for mixed costs?
Take the months with the highest and lowest volume, divide the change in cost by the change in volume to get variable cost per unit, then subtract to find the fixed part. This sample checks it with a regression.