Activity-based Costing Hospital

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Activity-basedCosting: Hospital

There are several activities in a hospital that accountants canidentify for assigning costs with resources to services (Kaplan &ampAtkinson). This paper outlines (with brief explanations) examples ofsuch activities.

Cleaning and landscaping this is one of the main activities in anyhospital, and it consumes a considerable amount of the organization’sresources. Reception and admission of patients there are severalresources (which make up costs) involved in this activity (Kaplan &ampAnderson, 2013). Reception and admission of visitors hospitals havetwo main categories of visitors- those who visit in-patients andVIPs. Consultation with physicians this is the core activity in allhospitals. Administration of tests there are many categories oftests including lab tests and their costs would be combined andcategorized under this. Dispensing medication to patients it has awide range of activities going by the fact that it is formed aroundan organization’s core activity. Therapy this activity consumesmore human resources than any other resources. Preparation of mealsthis is done for both patients and members of staff. In somehospitals, meals are prepared even for the patient’s visitors. Itis, therefore, a key activity that should not be ignored in as far asactivity based costing is concerned (Kaplan &amp Atkinson, 2015).Monitoring of in-patients this is mainly done through frequent nursevisits. Security and related activities it is a key activity, andits absence may cause havoc. Receipt and inspection of drugs andother supplies this can be easily traced through the procurement/purchasing department. Other activities include dictation, financialoperations, educating the patients as well as members of staff,ambulance related activities and patient preparation.

To wrap things up, it is not possible to execute activity basedmethod of costing in a hospital’s accounting department if theabove accountings, among others, cannot be identified. This isbecause the procedure for activity-based costing is to assign thecost of each of these activities to goods and services produced.


Kaplan, R. S., &amp Anderson, S. R. (2013). Time-drivenactivity-based costing: a simpler and more powerful path to higherprofits. Harvard business press.

Kaplan, R. S., &amp Atkinson, A. A. (2015). Advanced managementaccounting. PHI Learning.

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