Activity-Based Costing Systems

Summary

As a method of managing expenses within an organization, the activity-based costing (ABC) approach has warranted the status of a popular tool for managing accounting issues by transforming indirect costs into direct ones. In their study, Esmalifalak, Albin, and Behzadpoor (2015) scrutinize how the sources of uncertainty associated with the ABC system are related to the system’s cost estimates. For this purpose, three key ABC models, namely, the traditional approach (TABC), the fuzzy one (FABC), and the Monte Carlo framework (MCABC), are analyzed in the article.

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The research incorporates several hypotheses that it strived to prove. The first hypothesis states that there is a mean difference between the effects of applying the TABC strategy and the FABC approach. The second hypothesis posits that there is a mean difference between the TABC framework and the MCABC approach. Finally, the third hypothesis claims that there is a substantial mean difference between the outcomes of the FABC strategy and the MCABC framework.

The research is performed in the hospital context, which implies the need to coordinate several types of costs, including direct and indirect ones. Namely, the analysis focuses on the expenses taken to assist the support department of the hospital (Esmalifalak et al., 2015). As a result, the estimates for the unit cost per hospital appliance could be calculated. The study was performed with the help of the quantitative design, namely, the fuzzy triangular membership function.

The results of the study demonstrate that the approaches such as FABC and MCABC allow making the outcomes of the analysis more accurate, thus reducing the number of costs and making key financial processes more effective. Furthermore, the integration of the described strategies into the ABC process leads to the drop in the “cost to serve” expenses, which implies that an organization will have a chance to manage its financial assets better (Esmalifalak et al., 2015, p. 65). The improvement in the precision of financial forecasts causes critical risks to the performance of an organization to disappear, improving the competitive advantage of a firm and paving the way to its financial success in the market of its choice.

Reaction

Managing costs in the healthcare setting is always a challenge due to the problems linked to the management of staff, the necessity to meet the latest quality standards, and the need to respond to community-specific health issues. Therefore, the introduction of a system that could potentially allow for more flexible management of a hospital’s financial assets is a welcome change. Thus, the integration of the ABC framework into the hospital setting is expected to cause an immediate improvement in the management of financial assets, leading to the enhancement of the healthcare service efficacy.

The redesign of the approach toward managing costs within the hospital context is likely to help in addressing one of the pressing concerns in the contemporary healthcare system, namely, the low nurse-patient ratio. With the realignment of the cost management system, opportunities for offering nurses greater incentives and a larger number of benefits in the workplace will cause a rise in the number of hospital staff members (Yangyang et al, 2016). Moreover, options for improving their competencies can be created with the help of training and courses to ensure that a proper talent management approach is deployed. Thus, the efficacy of the healthcare services in the community will rise, allowing them to manage public health issues better.

References

Esmalifalak, H., Albin, M. S., & Behzadpoor, M. (2015). A comparative study on the activity based costing systems: Traditional, fuzzy and Monte Carlo approaches. Health Policy and Technology, 4(1), 58–67. Web.

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Yangyang, R. Y., Abbas, P. I., Smith, C. M., Carberry, K. E., Ren, H., Patel, B.,… Lopez, M. E. (2016). Time-driven activity-based costing to identify opportunities for cost reduction in pediatric appendectomy. Journal of Pediatric Surgery, 51(12), 1962-1966. Web.

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StudyCorgi. (2021, August 5). Activity-Based Costing Systems. Retrieved from https://studycorgi.com/activity-based-costing-systems/

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"Activity-Based Costing Systems." StudyCorgi, 5 Aug. 2021, studycorgi.com/activity-based-costing-systems/.

1. StudyCorgi. "Activity-Based Costing Systems." August 5, 2021. https://studycorgi.com/activity-based-costing-systems/.


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StudyCorgi. "Activity-Based Costing Systems." August 5, 2021. https://studycorgi.com/activity-based-costing-systems/.

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StudyCorgi. 2021. "Activity-Based Costing Systems." August 5, 2021. https://studycorgi.com/activity-based-costing-systems/.

References

StudyCorgi. (2021) 'Activity-Based Costing Systems'. 5 August.

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