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Week 4 Accounting for Health Care Professionals Research

Week 4 Accounting for Health Care Professionals Research

Question Description

ASSIGNMENT

Research and select the journal articles you will use as sources for

your Case Study. Prepare a two page paper in APA format, that summarizes

the articles and prepare an annotated bibliography.

INSTRUCTIONS BELOW

week four will cover chapters nine (Introduction to ManagerialAccounting and Cost Savings), ten (Cost Estimation andCost-Volume-Profit Relationships), and eleven (Product Costing:Attaching Costs to Patient Services) in the textbook. This week youwill describe how management accounting is a value-added discipline indetermining product and business segment costs; interpret how costbehavior, operating leverage, and profitability work; define how costsare accumulated and assigned to products and services, and determinerelevant factors affecting business decision making.

Research and select the journal articles you will use as sources for your Case Study. Select a minimum of three.Summarize the articles and prepare an annotated bibliography. Thesesources will be used in support of the final assignment (Case Study). Websites are not Journal articles.When listing your journal articles, make sure you follow the APA formatwhen listing references on your reference page. Make sure your finalpaper follows your outline as I will compare the two. Please make sureyou read the entire directions for the two discussion posts (Cost FlowsAmong Service, Merchandising, and Manufacturing Enterprises and Productcosting) this week.

Product Costing can take on any number of definitions from variableand full absorption costing to standard, actual, normal and capacitycosting approaches. This textbook is focusing largely on variableversus full absorption costing.

Full absorption costing is the approach to product costing inmanufacturing that attaches all direct and indirect costs related toproduction to the work in process and finished goods. The three primaryclassifications are direct materials, direct labor and manufacturingoverhead. The full absorption costing method is the only acceptablemethod under GAAP. Full absorption is fairly straight forward, any costthat is a direct input into the product becomes a part of the costbasis, and any cost that directly supports the production processwhether clearly traceable to the product or not also becomes part of itscost basis. The manufacturing overhead costs often referred to asindirect costs, are varied in nature and present some difficulties inhow those costs should be allocated to the product. Accountingprocesses over the last few decades have become more sophisticated inhow these indirect and sometimes obscurely connected costs areassociated with the finished good. Activity Based Costing (ABC) is usedto create various pools of similar and associated costs rather than onepool of all costs. These ABC cost pools are allocated to the finishedproduct using specific allocation bases that simulates direct costsproviding a better association of costs with the products that have usedthose cost pool services. An example would be a mechanic’s cost poolfor production equipment repair and maintenance.

The variable or direct method of costing is an approach thatassociates only variable costs with the production of product (variablecosts are those that change with each change in activity level). Thetheorists that support this approach take the position that fixed costswould remain whether there is production or not so those costs havenothing to do with the value-added process of production. There is nopresentation of cost of goods sold in a direct/variable costing incomestatement, variable costs are subtracted from net sales to arrive atprofit contribution and fixed costs are then subtracted to determineoperating income.

Both approaches have their strengths and weaknesses. Since fullabsorption is sanctioned by GAAP as the only acceptable costing approachfor product that is what will be seen on the financial statements ofpublicly traded companies. The direct/variable costing approachprovides management with added information as an internal reportingresource.

Epstein, L. & Schneider, A. (2014). Accounting for health care professionals. San Diego, CA: Bridgepoint Education, Inc.