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Progress in ABC costing Essay

An industry which has benefited however from ABC is the hospitals. Cheryl Grandlich (2004) says, ‘to develop this type of pricing successfully, it was critical that all procedures carried out were to be classified into levels based on resource utilisation. ‘ An example of this is the Froedtert Memorial Lutheran Hospital in Milwaukee. It has used ABC to identify costs and charges for anesthesia care, electroconvulsive therapy and several surgical procedures.

In all these procedures ABC was used to identify costs at different levels of the procedure and to hopefully to identify potential areas for cost savings or actual realized savings. Lisa Grandlich (2004) reports, ‘ABC provides a mechanism for health care organisations to identify costs, develop appropriate charges, determine variances by providers to improve standardisation, and give detailed information for bench marking with peer facilities. ‘ In conclusion it is hard to determine whether or not ABC is an answer to our prayers or is just simply one of many tools which are available to the organisations around the world.

The success or failure of this method is not just rooted to today’s economic climate but will also have instrumental affects in future business ventures. The popularity of this method of

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costing will more than likely be an ongoing debate, certain people will make certain statements either being positive towards ABC or negative. The only way in which the popularity of ABC can maybe be determined is if every organisation adopts it or rejects it. As far as the Great Debate from Tom Kennedy goes, the subject of ABC’s pros and cons will be talked about for some time to come.

The heading ‘The Great Debate’ seems to sum this subject up to a key.

Bibliography

Chutchian-Ferranti. Joyce, August 1999, Activity based costing, Computerworld, Vol. 33, Iss. 32, Pg. 54 Cross. Lisa, June 2003, Progress in ABC costing, Graphic Arts Monthly, Vol. 75, Iss. 6, Pg. 30 Grandlich. Cheryl, January 2004, Using activity based costing in surgery, Association of Operating Room Nurses, Vol. 79, Iss. 1, Pg. 189 Krumwiede. Kip. R, April1998, ABC whys it’s tried and how it succeeds, Management Accounting, Vol. 79, Iss. 10, Pg. 32

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