Analysis of the current costing process based on cost centers and the feasibility of implementing activity-based costing in Valiasr Lamard Hospital

Dissertation for receiving the degree of senior expert

Accounting field

Abstract:

Activity-based costing system is one of the new costing systems of products and services, which provides better and more accurate information needed by managers and helps users in making correct and appropriate decisions. This research is a part of the scientific and applied research that has been carried out in Valiasr Lamard Hospital, after reviewing and analyzing the existing costing method of that hospital and identifying its strengths and weaknesses, it explained the importance of the activity-based costing system in Valiasr Lamard Hospital, and then the steps of the ABC system were identified. 90-91, the mentioned hospital has examined the financial statements and financial information related to that period and after getting to know the system governing the hospital and the way of its accounting operations and identifying the major activity centers and the logical integration of these activities, it finally identified 4 departments as the basis of the ABC system and selected the cost drivers of each of these activities. Overhead costs become more accurate, but it also makes the managers of public and private hospitals take better decisions regarding planning and cost control by using the information obtained and help the hospital to earn profit. Introduction

Given the importance of access to correct information in managers' decision-makers and the development of advanced technologies in various dimensions along with the increase in the complexity and diversity of activities, understanding these changes and measuring their effects on organizational costs is very important. The importance of this for service units is double considering that the degree of diversity and changes in them is more than production activities. It is obvious that knowing these activities and measuring their effects on the total cost of services requires the design of a suitable and efficient costing system to be able to recognize the diversity and complexity of activities and consider it on the costs of providing services. Hospitals and other health care organizations are increasingly facing a challenging and competitive environment. The high focus on the quality of patient care, the high cost of providing services, and intense competition are among the factors that force these organizations to reconsider their services. Kend (1, 1996) in the hospital department, so far no practical measures or even theoretical studies have been carried out in relation to the identification of costs and the calculation of the cost of services of service activities, and considering the importance that financial information and cost will have on management decisions from various dimensions, it is necessary to study and provide practical and practical methods in this field. and it is a cost (Kaptini et al. 2, 1998) in this sector, despite other economic sectors such as the industry sector or some service sectors, even traditional systems for costing and calculating the cost have not been used. The goal of any cost management and costing system is to provide accurate and practical information to help organizations provide quality goods and services in a competitive environment (Gonaskaran 3, 1999). Therefore, the need to study and review different systems in this field and use modern costing systems that are common worldwide is a basic necessity and should be given special attention. Cost can be defined as the cost of estimating the final cost of a product (Chen 4 and Wang 5). , 2007) In the past decades, there has been a lot of progress in costing methods, among the most recent of which we can mention the activity-based costing method (Innes et al., 1994). (Torney 7, 1996), the system is "activity-based costing" or so-called ABC system. Activity-based costing is a method for measuring costs, activity performance, and cost objectives. Costs are divided into the cost of activities at the unit, group, product, and cost levels at the institution level.. By using appropriate methods, this system considers the effects of changes in activities, complexity, diversity, and specific characteristics of each activity in the calculation of its costs. In fact, this method is designed with the assumption that activities and resources, and as a result, allocate costs and also allocate products and services (Tollington 9 and Wacher 10, 2001). In other words, the basic assumption of activity-based costing is that activities are spent on products, resources, activities and costs, resources are spent (Kaplan 11, 1984). Therefore, this method relates costs to activities based on the amount of resources used and then allocates them to cost purposes based on the amount of activities used (Turney 1996). In this way, the focus of activity-based costing is on creating accurate information about the cost of products (Kaplan, 1984). The structure of the activity-based costing method also consists of two stages: the first stage includes the estimation of resources that are not directly included in the cost category of the product and belong to support activities. In the second stage, the cost of each activity is assigned to a product according to a selected criterion based on the volume of that activity (Innes, 1995). Performance measurement (Kingkat, 1991, 12), guiding decisions (Murakel, 13 and Wu, 14, 2001) and helping to budget properly (Shank, 15 and Govindarajan, 1993) is one of the features of this system that distinguishes it from other systems. It is the ability to accurately identify costs and provide non-financial information to improve the performance and increase the efficiency of activities, and as much as possible by using appropriate methods, it quantitatively absorbs these effects in the calculation of the total price of services and products. Considering that the main elements and resources used in the service sector are the activities of human resources, the use of this system is very useful due to its capabilities and capabilities. 2-1-Statement of the problem Today, with the growth and development of advanced technologies in various dimensions, along with the increase in the complexity and diversity of activities, understanding these changes and measuring their effects on organizational costs is very important. The importance of this matter for service units is double considering that the degree of diversity and changes in them is more compared to production activities. It is obvious that knowing these activities and measuring their effects on organizational costs requires the design of a suitable costing system in this field. The importance of knowing and controlling costs in both public institutions and private organizations is not hidden from anyone. But achieving this goal requires the design of a suitable and efficient system that is able to recognize the variety and complexity of activities, and measure its impact on the costs of providing services. Due to its nature, traditional costing systems, especially those used in the country's hospitals, are practically unable to meet these expectations. Because these systems are based on a series of fixed tariffs and regardless of the conditions and status of each hospital, it calculates the cost of the services provided. It is obvious that the use of this method, in addition to causing problems and deficiencies in the calculation of the actual cost price, does not provide managers with appropriate information for making decisions. Therefore, the need to use modern costing systems, which are common in the world, is considered as a basic necessity. One of the new costing systems, whose various applications in service activities are expanding day by day, is the "activity-based costing" system, or the so-called "ABC" system. By using appropriate methods, this system considers the effects of changes in activities, complexity, diversity and specific characteristics of each activity in calculating its costs. One of the features of this system that distinguishes it from other systems is the ability to accurately identify costs and provide non-financial information to improve performance and increase the effectiveness of activities. And as much as possible by using appropriate methods, it quantitatively absorbs these effects in the calculation of the total price of services and products.