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Unformatted text preview: lement ing the ABC system, Clayton can gain a more detailed understanding o f costs and cost drivers. This is valuable informat ion fro m a cost management perspective. The system can yield insight into the efficiencies with which various activit ies are performed. Clayton can then examine if redundant activit ies can be eliminated. Clayton can study trends and work toward improving the efficiency o f the activities. In addit io n, the ABC system will help Clayton determine which programs are the most costly to operate. This will be useful in making lo ngrun decis io ns as to which programs to offer or emphasize. The ABC system will also assist Clayton in setting prices for the programs that more accurately reflect the costs of each program. 2. The concern wit h using costs per patientyear as the rule to allocate resources among its programs is that it emphasizes “input” to the exclusion o f “outputs” or effect iveness of the programs. Afterall, Clayton’s goal is to cure patients while controlling costs, not minimize costs perpatient year. The problem, of course, is measuring outputs. Unlike many m...
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- Spring '10
- Cost Accounting