title: Application of the Activity-Based Costing Method for Unit-Cost Calculation in a Hospital.
abstract: BACKGROUND
  Choosing an appropriate accounting system for hospital has always been a challenge for hospital managers. Traditional cost system (TCS) causes cost distortions in hospital. Activity-based costing (ABC) method is a new and more effective cost system.
  
  
  OBJECTIVE
  This study aimed to compare ABC with TCS method in calculating the unit cost of medical services and to assess its applicability in Kashani Hospital, Shahrekord City, Iran.‎
  
  
  METHODS
  This cross-sectional study was performed on accounting data of Kashani Hospital in 2013. Data on accounting reports of 2012 and other relevant sources at the end of 2012 were included. To apply ABC method, the hospital was divided into several cost centers and five cost categories were defined: wage, equipment, space, material, and overhead costs. Then activity centers were defined. ABC method was performed into two phases. First, the total costs of cost centers were assigned to activities by using related cost factors. Then the costs of activities were divided to cost objects by using cost drivers. After determining the cost of objects, the cost price of medical services was calculated and compared with those obtained from TCS.‎
  
  
  RESULTS
  The Kashani Hospital had 81 physicians, 306 nurses, and 328 beds with the mean occupancy rate of 67.4% during 2012. Unit cost of medical services, cost price of occupancy bed per day, and cost per outpatient service were calculated. The total unit costs by ABC and TCS were respectively 187.95 and 137.70 USD, showing 50.34 USD more unit cost by ABC method. ABC method represented more accurate information on the major cost components.
  
  
  CONCLUSIONS
  By utilizing ABC, hospital managers have a valuable accounting system that provides a true insight into the organizational costs of their department.
authors.affiliation: Department of Health Economics, School of Health Management and Information Science, Iran ?University of Medical Sciences, Tehran, Iran. mehdijavid1@yahoo.com.
authors.forename: Mahdi
authors.initials: M
authors.lastname: Javid
authors.forename: Mohammad
authors.initials: M
authors.lastname: Hadian
authors.forename: Hossein
authors.initials: H
authors.lastname: Ghaderi
authors.forename: Shahram
authors.initials: S
authors.lastname: Ghaffari
authors.forename: Masoud
authors.initials: M
authors.lastname: Salehi
mesh_terms: D003361:Cost Allocation / Q000379:methods*; D003363:Cost Control; D003365:Costs and Cost Analysis; D003430:Cross-Sectional Studies; D004180:Direct Service Costs / Q000706:statistics & numerical data; D004469:Economics, Hospital; D005377:Financial Management, Hospital / Q000379:methods*; D017721:Hospital Costs; D006801:Humans; D007492:Iran