· Understand the concept of cost drivers
· Examine how cost drivers help managers govern resource allocation
· Analyze how cost accounting decisions impact costs of products and services
Questions:
1. What is the cost of treating a patient with pancreatitis under each of the cost accounting systems? A patient with cardiac dysrhythmia? A patient with liver cancer? What accounts for the changes from one system to the next?
2. Which of the three systems is the best? Why?
3. From a managerial perspective, of what use is the information in the second and third systems? That is, how, if at all, would this additional information improve Dr. Julian’s ability to control costs?
4. What should Dr. Julian do?