Implementation Of Activity Based Costing On The Health Care System Based On Kaplan And Porter 's Method

1430 Words6 Pages
This paper will be supply an overview about situation in implement of Activity Based Costing in the health care system based on Kaplan and Porter’s method. The main purpose of the paper is that analyzes advantages and disadvantages of this method when worldwide use of this method in health care based on researches in Europe and USA. In addition, basing on Porter’s ideas, there are a large number of ways which help us reduce cost in health care. It will be argued that whether Activity Bases Cost method is able to bring benefit in reducing costs to health care, especially hospitals, or not.
A great number of countries spend enormous money on health care, especially health expenditure in U.S around 17% of GDP and in European around 10% of
…show more content…
It simply requires a new way to accurately measure costs and compare them with outcomes (Kaplan & Porter, 2011).
To make it clearer, ABC method identified all sources of operational costs, then allocate these costs by product and service based on the volume of operations or transactions occurring during the provision of service or product. With ABC method, cost to serve a customer can determine with certainty. After deducting the cost of product and cost to serve each customer, to calculate customer profitability brings. Methods ABC costing and customer specific product costs help pinpoint profit per customer brings and help position products and services accordingly. (Averkamp, 2003)
Application ABC method can help employees understand the full cost involved, they can analyze costs and determine which activities bring added value and does not operate, thereby improving operational efficiency. This is a continuous improvement process starts from analyzing costs, reduce the operation does not create additional value and thereby achieve overall efficiency. ABC helps organization create better products, to meet the needs of the market with a competitive cost. Product profitability analysis and customer profitability brought by this method has contributed actively to the process of decision making at the management level;
Get Access