ly differs on the basis of inpatient or out patient status, and specific treatment, and (2) accounting records for services delivered must be maintained on both an aggregated and a disag gregated basis. Effective cost accounting can contribute to the fulfillment of each of these requirements.
Existing cost models employed in health care and hospital accounting differentiate between fixed and variable costs.4Fixed costs are those which must be borne by an organization, regardless of activity levels, while variable costs are those which fluxuate according to activity levels. In addition to fixed/variable distinctions, existing health care and hospital costing models also differentiate between full costs, direct costs, indirect costs, job costs, process costs, and other
4J. C. Cooper, and J. D. Suver, "Product Line Cost Estima tion: A Standard Cost Approach," Health Care Financial Manage ment, v. 42, April 1988, p. 50.
3concepts of cost.5 Through the application of these cost con cepts, standard costs are developed. The use of standard costs involves an evaluation of the efficiency of the process being costed, through an analysis of the variance between standard and actual costs. Wide use is made among hospitals and other health care delivery organizations of the standard cost concept in cost accounting.6
Internal cost controls within organizations cover a multi tude of factors and considerations, depending on the activity being controlled. Within production organizations, one of the most important forms of internal cost control involves the use of standard costs. Hospitals are, in one sense, production organizations,
Contemporary theorists and analysts suggest that the long standing approach to cost accounting will simply not do the job required in the contemporary environment, regardless of the activity being costed.7 To overcome the deficiencies of existing cost accounting procedures for manufacturing opera...