How does Activity Based Costing (ABC) differ from traditional costing?

 

How does Activity Based Costing (ABC) differ from traditional costing?  Which is better to allocate the cost of hospital X-ray equipment?  Why?

  Indirect costs must be allocated to assign them to activities that caused them to be incurred.  A significant indirect cost in Health Services organizations is the cost of Financial Services.  To allocate these costs would it be better to use patient revenues or the number of bills generated?  

 

Read the article from the link below.  This Week’s chapter is on cost allocation.  The article was written in 2011, just before the implementation of the Affordable Care Act.  With the implementation of the Affordable Care Act, is the method of cost allocation more important or less important?  Why?  

https://www.physicianleaders.org/news/cost-allocation-can-be-simple-abc

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