Cost Accounting

Introduction

Cost accounting can be defined as evaluating data relating to cost in order for management to regulate actions and strategize for the future (Vanderbeck, E., 2013). Financial information is crucial in order for an organization to manage its expenses and for budgeting reasons. There are a few types of cost accounting that an organization can use in order to analyze financial information. Each method is unique and considers different variables when analyzing monetary data. It is dependent on the leaders of the organization to determine what cost accounting system would be best suited for their financial operations. Although there are numerous of methods for costing, this paper will particularly concentrate on activity based costing within the healthcare field.

Activity based costing within a healthcare system

As mentioned earlier, costing systems vary and use different variables when determining or analyzing monetary information. Activity based costing (also known as ABC) as defined by Gapenski (2012) identifies the different steps necessary to produce a good or service, approximates and totals the costs of those steps. It is an upstream approach and recognizes all cost drivers (steps, procedures) within the organization into creating that product or service (Gapenski, L.C., 2012). One might ask, well how can this system be significant to a healthcare facility? There are actually numerous activities that go on when a person decides to visit his/her physician or during emergency health situations. Let’s take an emergency situation for example. A football player receives a helmet to helmet hit, loses consciousness and has to be carted off the field. He is then taken by the ambulance to the nearest hospital w...

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...is data can be signified as if the organization were to consider saving more money by reducing staff numbers, they would be able to do so without compromising quality.

Conclusion

As mentioned earlier, costing systems vary and consider different factors when evaluating financial information. It is vital for supervising personnel and leaders to consider which costing system would best suit the organization’s needs. The activity based method is an effective tool when used properly. But of course, all tools have their highs and lows. The ABC method can project a more accurate tale of the organization’s financial strengths and weaknesses. But keep in mind, it requires a significant amount of time and each cost driver is to be carefully considered. Regardless of the costing system used, proper analysis of financial data is crucial to the future of the organization.