Hospital costing and Transport Costing

Hospital costing

The services provided by the medical organizations like hospitals health centres, nursing homes, medical camps and clinics require cost analysis, which is possible through service costing.

The hospital cost includes fixed charges such as labour salaries, maintenance charges, rent, administration expenses and other overheads. Also, the variable charges like medicines, bed charges, doctors fees, etc. are involved in the total cost.

A hospital is engaged in providing various medical services to the patients and hospital costing is applied to determine the cost of these services.

A hospital may have the following departments on the basis of functions performed by them:

• Outdoor Patient Department (O.P.D.).
• Indoor Patient Department (Medical Wards).
• Medical Service Departments e.g., X-Ray Department, Scanning Centre, Pathology Laboratory etc.
• General Service Departments e.g., Boiler House, Power House, Catering Department, Laundry Room, Administrative Office, Works Maintenance Department etc.
• Miscellaneous Service Departments i.e., the departments engaged in providing services to the above four departments such as transport department, dispensary, general porting etc.

The operating costs of Outdoor Patient Department, Indoor Patient Department, Medical Service Departments and General Service Departments are determined with reference to the suitable unit of cost and in doing so the costs of miscellaneous service departments are apportioned to them on some suitable basis.

The common units of cost of various departments in a hospital are follows:

• Outdoor Patient Department Per Out-patient attended.
• Indoor Patient Department Per Room-day.
• X-Ray Department Per 100 units.
• Scanning Centre per Case
• Pathology Laboratory per 100 Requests
• Laundry Department per 100 items laundered
• Catering Department per Patient per Week.

The costs of a hospital are divided into fixed and variable costs. Fixed costs may comprise salaries of administrative staff, depreciation of building, rent of building, depreciation of surgical and medical equipments etc., while variable costs may comprise light and power, water, laundry charges, food supplied to patients etc.

Transport Costing

Transport Costing refers to the determination of the cost per unit of services rendered by a vehicle. Its include Water, Air, Road and Railways. Motor transport includes Buses, Taxies, Private Cars, Carriers and Lorries etc. E.g. The cost/passenger/km or cost/ton/km.

Objects of Transport Costing

1. It helps in controlling, operating and maintenance costs.
2. Cost of using own vehicle and hired vehicle can be compared.
3. Operating costs of different vehicles can be compared and thus efficiency can be improved.
4. Comparison of oil consumption and time taken for a trip with other trips is possible.
5. Proper apportionment of costs to different departments which use the service is possible.
6. It provides information for giving quotation and fixing the rates.

Objectives of Transport Costing

• To find cost per unit of operating a vehicle and to fix the rate for the carriage of passengers or goods.
• The control of the cost of operating each vehicle.
• To compare the cost per unit of one means of transport with that of another, and to find out the profitable means of transport.
• To compare the cost per unit of operating one vehicle, with another vehicle, and to ascertain the efficiency of each vehicle.
• To help to fix the hire charges of a vehicle where a vehicle is given on hire.

Cost Classification

The expenses incurred by a transport concern can be classified into three categories.

1. Fixed charges or Standing charges.
2. Maintenance charges.
3. Operating or Running charges.

1. Fixed Charges or Standing Charges

It includes expenses, which remain fixed, whatever may be the distance covered, or trips made. The vehicle may be idle, but these expenses have to be met. Therefore, they are called as fixed charges.

Example: Garage rent, insurance premium, road license fee, interest on capital, vehicle tax, establishment expenses of the work shop, head office expenses, depreciation of the vehicle (based on time), wages of drivers, conductors etc. (based on amount to be paid on a fixed rate, regardless of distance covered).

2. Maintenance Charges

These expenses are incurred on the repairs and maintenance of the vehicle, so as to keep the vehicle in proper condition. They are semi-variable or semi-fixed in nature.

Example: Repairs and maintenance, spares and accessories, wear and tear of tyres and tubes, supervision expenses, painting charges, overhaul expenses.

3. Operating Charges

These expenses are incurred on the actual running of the vehicle. They vary with the distance covered or the trips made. They are variable in nature.

Example: Petrol or diesel expenses, lubricating oil and grease, salaries and wages of drivers, conductors etc. (if it depends upon the distance covered, or by the number of trips made), depreciation of vehicles (based on the mileage run) etc.

Advantages:

The usefulness of transport costs becomes apparent when we consider the following advantages:

(a) Choosing between alternative means of transport. A transport company- owning Lorries may compare the cost of using a lorry with the prevailing railway rates and decide to make use of the alternative if that appears to be cheaper.

(b) Comparing the cost of maintaining one vehicle with the cost of another vehicle of the same type.

(c) Determining the basis for charging to departments using the service.

(d) Determining the price at which a vehicle should be hired out.

(e) Comparison between owned transport and hired transport to decide whether it is economical to go in for a hired one.