Activity based costing (ABC) is a new age accounting system developed to overcome the limitations of traditional costing system, which in today’s technologically advanced world has lost its ability to provide accurate and useful cost information often required in taking various managerial decisions, like setting of selling price, ascertaining profitability of products as well as customers, taking a make or buy decision, eliminating the non-beneficial activities, and rewarding the employees. In this paper, an ABC model is developed for a government hospital in the state of Bihar in India to quantify its various public health related services. Although, there are limited published research papers related to application of ABC model in a specific department or method of a healthcare system, none of them has investigated its scope for organization-wide implementation. The results obtained from the developed ABC model in the public hospital would provide more comprehensive and accurate cost information, and radically contribute to the hospital administration in effective planning, controlling and decision making. This paper also elucidates about various obstructions and difficulties encountered during the implementation phase of ABC model in an Indian healthcare setting.
Earned Value Management (EVM) has been a well-known methodology used since the 1960s when the US department of defense proposed a standard method to measure project performance. This system relies on a set of often straightforward metrics to measure and evaluate the general health of a project. These metrics serve as early warning signals to timely detect project problems, or to exploit project opportunities. A key aspect of EVM is to estimate the completion cost of a project by considering both cost and schedule performance indices. However, good performance of cost and schedule performance indices does not necessarily guarantee cost effectiveness of the project regardless of the overhead costs. The reason is because, in most project-based organizations, overhead costs constitute a significant proportion of the total costs. However, EVM indices are usually calculated in the absence of the so-called overhead costs. This paper, first, seeks to remedy this problem by proposing a practical procedure of allocating overhead costs in project-based organizations. Then the traditional EVM indices are revised by consider-ing the allocated overhead costs. Finally, a case study demonstrates the applicability of the proposed method for a real-life project.