MANAGERIAL ACCOUNTING BASICS, COST BEHAVIOR, AND PROFIT ANALYSIS (3)
Posted on March 7, 2009 - Filed Under Finance
A critical part of managerial accounting is the measurement of costs. In fact, the concept of costs is so important that it has spawned its own field of accounting—cost accounting. Cost accounting generally is considered to be a subset of managerial accounting, although cost accounting systems also are used to develop the expense data reported on a business’s income statement. Therefore, cost accounting bridges both managerial and financial accounting.
Unfortunately, there is no single definition of the term cost. Rather, there are different costs for different purposes. As a general rule for healthcare providers, a cost involves a resource use associated with providing, or supporting, a specific service. However, the cost-per-service identified for pricing
purposes can differ from the cost-per-service used for management control purposes. Also, the cost-per-service used for long-range planning purposes may differ from the cost-per-service defined for short-term purposes. Finally, as we discussed in Chapters 3 and 4, costs do not necessarily reflect actual cash outflows.
Taken From : HEALTHCARE FINANCE
Costs are classified in two primary ways: by their relationship to the
volume (amount) of services provided and by their relationship to the unit
(i.e., department) being analyzed. In this chapter, we focus on the first classification
method—the relationship of costs to volume. Our discussion of the
latter classification method will be deferred until the next chapter.
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