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Improving hospital cost accounting with activity-based costing
1Michael G. DeGroote School of Business, McMaster University, Hamilton, Ontario, Canada.
Health Care Management Review
|January 1, 1993
Summary
Activity-based costing improves product costing accuracy. Combining it with standard costing helps healthcare administrators manage health service costs effectively and maintain financial health.
Area of Science:
- Healthcare Management
- Cost Accounting
Background:
- Conventional costing systems present limitations in accurately reflecting product costs.
- Effective cost management is crucial for financial sustainability in healthcare organizations.
Purpose of the Study:
- To introduce activity-based costing (ABC) as an advanced method for product costing.
- To demonstrate how ABC, combined with standard costing, can enhance financial control in healthcare.
Main Methods:
- The article introduces the principles of activity-based costing.
- It proposes integrating activity-based costing with standard costing methodologies.
Main Results:
- Activity-based costing offers improvements over conventional costing systems for product costing.
- The integration of ABC and standard costing provides enhanced planning and control over health service costs.
Conclusions:
- Activity-based costing is a valuable tool for improving product cost accuracy in healthcare.
- Combining activity-based costing with standard costing empowers healthcare administrators to optimize financial performance and ensure profitability.