Improving 

hospital cost accounting with activity

– based costing 

Group Members                                                   Roll Number

Ankita Kaushik                                                              PF2123-E348

Umang Gada                                                                 PF2123-E344
Madhuri Kushwah                                                        PM2123-E337
Ami Zatakia                                                                    PF2123-E347
Shardul Walhekar                                                         PM2123-E338
 Introduction to Case

 Health sector Plays an Important Role in an Indian Economy.

 This case is about application of Activity-Based costing in Healthcare Sector.
 Case is about improving hospital cost Accounting by using Activity – based
Costing (ABC) method which helps in identifying activities in an organisation.
 In Simple Words Activity Based costing Helps Health sector in Doing More with
Less.
 Activity-Based Costing 

 Activity-Based Costing (ABC) is a system which can be used to find Production

Cost.
 It Breaks down overhead cost between production-related Activities.
 It is an Approach to determine the costs associated with Providing Patient care or
clinical service in Healthcare sector.
 This method is very much usable in Health care sector as it enables a hospital to
approach a third-party payment system with a higher quality marker for a lower
price.
 Objective of the Study :

 The overall objectives of the study was to combine Activity-Based costing with
Standard costing which helps Health care administrators to better plan and control
the cost of health services.
 Steps used in case for Application of Activity-Based Costing in Health Care 
1. Identify the products that are chosen cost objects.
2. After that identify the Direct cost of the product.
3. Select the Activities and cost Allocation bases to use for Allocating Indirect cost
to the products.
4. Assigning the cost of Activities to products.
 Research Methodology
 Activity Based Costing :  It’s a method of assigning overhead and indirect cost
to Products and Services  .The Cost Driver Rate ,which is  the Cost pool total
divided by Cost Driver ,is used to calculate the amount of overhead and indirect
cost related ot a particular activity

 Conventional Costing :The Traditional Costing system, is an accounting 

method used  to determine the cost of making products to make a Profit and  it
is based on allocating Overhead or Manufacturing  Costs .This system relies on
calculating predetermined overhead rates and applying  the rates to a given
metric
 Learning Outcomes

 Objectives of the case

 Data used in Case study
 Importance of Cost System
 Use of this method in Healthcare Sector
 Advantages to Healthcare sector by applying Activity-based costing
 Learning Outcomes
 What is Cost Accounting ?
 What is Activity-Based costing ?
 What is Conventional Costing ?
 How Activity-Based Costing is used to determine Manufacturing cost of the
product ?
 When is this method implemented in Cost Accounting & Management ?
 Management Accounting Techniques.
 Findings of the Study.
 Recommendations

 Activity based costing should be simple and less cumbersome 

 It should be inexpensive  and cost effective
 Activity based costing method should be used to prepare yearly profits
statements 
 It should be used for multiple product or bulk quantity product
Thank You