Use of Absorption Costing and the RKW system for generating managerial information: A hospital based case study

Abstract

Monitoring and controlling costs are relevant matters to any organization, especially hospitals which usually encounter limitations in relation to available resources, as this information is vital to successful management. The literature frequently points to the advantages of using different cost systems for service organizations, especially those involved in the health care industry, although these models have not been validated in a complete hospital organization, nor have their real and effective benefits been identified. As such, the objective of this study is to demonstrate the use of absorption costing joined with the RKW system for generating managerial information in a hospital organization, thus making use of a parallel system of costing and costs and thereby relating them to fulfillment of legal precepts. The research was conducted starting with an interview held in November 2007 with the person responsible for hospital costs, followed by documental analysis. In light of the discoveries of the research and review of the literature it can be concluded that the traditional absorption system joined with the RKW system allows for monitoring of costs of hospital procedures with an acceptable level of precision, and is an important instrument in management.