Variable expenses are costs tied to the number or services performed or products sold. If you sell cookies, for example, buying flour, sugar and butter are variable expenses. The more cookies you sell, the more flour, sugar and butter you need.

There are several kinds of variable expenses. First, consumables. Consumables can’t be transferred patient to patient. They are consumed or used during a treatment and have to be replaced. Think about your cookie business. Once you use your flour and sugar in a batch of cookies, you can’t use it again in another batch. The same is true in a hospital. Variable expenses include anything that must be used during a procedure, for example IV needles, bags of saline, paper to cover the exam table, etc. Anything used in a hospital room, sheets towels, tissues, etc are variable expenses. The total cost for these items goes up and down depending on how much a service is used.

Because there can be so many variable expenses associated with a single treatment, hospitals usually estimate a single price per procedure to cover all these expenses.

The variable expenses that cost the hospital the most are usually those associated with personnel, specifically the salary and benefits required for each employee. Total salary and benefit figures are based on the number of people you will need to operate the service.

How to Determine Total Compensation
To determine the total compensation for a project the salary for a position should be multiplied by the number of FTEs required for the project. For example, if you determined you would have to hire 5 FTS RNs and one RN FTE is paid $50,000. You could determine the total compensation by multiplying $50,000 by 5 for a total of $250,000.

How to Determine Total Benefits
To determine how much an organization, like a hosptial, will spend on benefits for the employees take the total compensation (the salaries of all FTEs added together) and multiply it by the percentage the organization spends on benefits. For example, if the total compensation for all employees in a business was $100,000 and the business paid 20% of total salary toward benefts, you could multiply 100,000 by 20% (0.20) and determine that an additional $20,000 in benefits compensation should be planned for in the project’s expenses.

Finally, you learned in an earlier step that there is often revenue associated with research. There are also expenses associated with research. Just as they estimate the revenue, hospitals can estimate how much it will cost to operate a service for research purposes. All these expenses should be added together to determine the total variable expenses.