The practice of activity-based costing in a hospital in Singapore

• Main Authors: Hua, Chan Chow, Hwei, Tan Hwei, Lee, Tay Kim
• Other Authors: Paul Cheung
• Format: Final Year Project
• Language: English
• Published: 2014
• Subjects: DRNTU::Business::Accounting
• Online Access: http://hdl.handle.net/10356/55535
• Institution: Nanyang Technological University

Activity-Based Costing (ABC) evolved as an answer to the need for a more accurate costing system, because conventional costing systems are not able to reflect the changes in production processes. As ABC developed in the manufacturing setting initially, it was discovered that it could also benefit seryice organisations. Furthermore, in view of the rising medical costs in Singapore, there is a need to implement systems which would lead to better information about costs, the activities that drive costs and cost allocations in hospitals, as an aid to better decision making (such as pricing of medical services) and planning. This project is based on a case study of ABC in a government hospital (Hospital A). A literature review was undertaken to provide a comprehensive understanding of ABC, its development, the benefits and limitations. In the case study, the implementatiop of the Singapore Government Management Accounting (SIGMA) system (which adopts the ABC concept) in Hospital A is discussed. As a result of the new system, more timely and accurate cost information became available; and activity-based budgeting and better performance evaluation are made possible. A comparison of the application of ABC in Hospital A, a government hospital, with that of another case study on XYZ Hospital, a government restructured hospital, showed that while both hospitals adopted ABC, the extent of its use and its benefits are different.