Cost Concepts Essay Example | Topics and Well Written Essays - 750 words

Cost Concepts - try ExampleOne can illustrate this in the case of the University of Colorado Hospital, a large pedantic hospital recently recognized as the highest performing academic institution in terms of delivering prize health c be in the United States for 2012. Using traditional cost systems, resource allocation distributed across overhead expenditures are done according to a measured amount or volume of item-by-item services or wares. For example, in terms of maternity care, the overhead cost could be spread across provider compensation, direct and indirect hospital costs, emergency room, transport, pediatric and a host of other product/service elements. Cost account in this setting is straightforward the total cost is measured as opposed to the measurement of a specific unit of the maternity service. Here, the outcome is fundamentally based on the attempt to determine how many units or the product or services are consumed. Activity-based cost accounting is differentia ted from this system because it is more detailed and comprehensive in the manner by which it calculates the cost. There are three steps by which it implements the system as opposed to the mere calculation of resources consumed 1) defining the activities that concur output 2) defining links between activities and output and, 3) developing the cost activities (p.5). In the case of the maternity service at the UCH, for instance, it lead include nonfinancial variables along with financial variables as bases for allocating costs. In addition, it will also employ a bigger number of cost drivers. It is, hence, more accurate in ascertain cost than the traditional cost accounting method. The impact of cost accounting is important. Hospitals like UCH will send for the cost on the basis of expected visits in assessments like the profit analysis model. This is significant is in particular on the face of the increasing frustrations of healthcare finance