A Case Study of Activity Based Costing Essay

6476 Words Mar 5th, 2012 26 Pages
BAYERO UNIVERSITY, KANO
SCHOOL OF POSTGRADUATE STUDIES,
FACULTY OF SOCIAL SCIENCES

A case study of Activity Based Costing in Lagos State Healthcare

By

POPOOLA, OLUWATOYIN MUSEDIKU JOHNSON

Course Facilitator: Professor Kabiru Isa Dandago

Being a paper presented in the M.Sc. Accounting Programme,
Department of Accounting, Bayero University, Kano-Nigeria

December 15, 2009
Abstract

The purpose of this study is to examine the healthcare systems, in particular the blood transfusion services in Lagos State Health Services. The study revealed the challenges, the pitfalls and other associated problems of adopting a costing technology which significantly departs from previous practices.
The research was based on a
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Coupled to this, the services had to deal with a reduced number of eligible donours. The appearance of the human variant of the BSE affected the management of the Lagos State's transfusion service at another level: since 1998 they have been forbidden to use imported plasma and for the first time, these centers were obliged to buy a 'raw' material which was hitherto free.
In line with this thought, management's focus on cost reduction and tighter cost control had become an important issue. Several researchers have addressed this issue by looking at costs for specific processes (Sonnenberg et al., 1999; Strauss, 2001; Amin et al., 2003) or by surveying the costs incurred by the transfusion system (Varney & Guest, 2003; Syrjala et al., 2001). This paper sits between these two strands by looking at the experience of a healthcare organization which has undertaken an overall project for implementing an innovative costing technique – activity based costing – for the whole institution.

2.0 Literature Review
2.1 Activity Based Costing: Conceptual framework
ABC assigns manufacturing overhead costs to products in a more logical manner than the traditional approach of simply allocating costs on single volume measures such as direct labour hours, direct labour costs, or machine hours. Furthermore, ABC has grown in importance in recent times because manufacturing overhead costs have increased

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