Based on this case the cost driver is to properly distribute the direct cost among the different divisions. Dr. Julian would like to control her departments costs by having them distributed fairly among the divisions without affecting the hospital’s reimbursement/revenue. Carroll University Hospital is currently using the standard costing unit, which is based on the cost of bed/day for inpatients. Currently the present cost accounting system that is being used at CUH takes the total direct cost of the departments, then allocates the indirect costs and distributes it among the departments evenly regardless of the actual resources being used in those departments, and without considering that there may be some patients in these divisions that may require more resources than others, this method does not seem to recognize the different activities, …show more content…
Julian is able to recognize which patients, and which of the three divisions: gastroenterology, cardiology, and oncology is using more of a variety of resources, since some patients do require more medication, lab work, and therapeutic treatment, based on the patient’s diagnoses. The information from the third system will provide Dr. Julian the ability to recognize and distinguish that not all patients require the same amount of care, some patients due to their diagnosis require different level of nursing care, some more than others. With this third approach Dr. Julian will be able to have a more precise cost of care service given to the different patients based on their necessities. The information provided by both second and third system will provide Dr. Julian with a more efficient way to control costs. She will now able to see the differences in costs among the divisions using the second and third approach. Depending on which approach is being used the cost for bed/day, medical treatment and nursing care can be higher and lower. With this new