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Paper Topic:

product costing vs. standard costing in health care


Alternatives for identifying a healthcare service cost are product costing and standard costing

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Product costing and standard costing

Product costing is a method of finding cost incurred by the organization by analyzing the actual resources consumed by a particular patient or service . It can either be process costing is where the patient is given job costing where examines the specific resources consumed by the patient in great detail and hybrid costing this one combines both job and process costing

(Bartlett Jones 2006 . Standard costing gives the estimates of what costs should be charged to different types of patients it can either use historical data , comparing the cost incurred

In both cases the major aim of the organization is to maximize the profit

In both cases the production costs are passed to patient . Product costing is more detailed and accurate this is because the records are kept as the patient is being treated and everything is recorded in a score card . While in standard costing it is less accurate and less detailed because the information is given being based from last data (Dieter , 2000

In product costing the information is more reliable and can be used to make decisions since they are responsive while in standard costing the information cannot be trustable because they are made of estimations and therefore they cannot be relied upon in making organizations decisions

Product costing method is more applicable like when a surgery is being carried upon an outpatient . This is because each outpatient will take different duration to be operated and also he will use different resources . Standard costing is appropriate when conducting tests like blood sugar , urine tests , and stool test among others this is because the same materials will be used to conduct the exercise and even the results will take the same duration (Bartlett Jones 2006


Bartlett Jones (2006 . Cost accounting for health care organization Tokyo : Bartlett publishers

Dieter , B (2000 . Developing a solid base for cost accounting system Health care financial management . New York : McGraw


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