Developing Accurate Costing Systems
25 Pages Posted: 15 Aug 2011
Date Written: August 15, 2011
Abstract
Developing accurate cost systems is not only a technical, but also an organizational challenge, as it requires taking into account the knowledge of non-accountants. However we know very little about this process of how cost systems are made more accurate in practice. This study, reporting the results from a field study undertaken in a UK Hospital, makes two main contributions: Firstly, we suggest that reducing the total error through trade-off or off-setting effects misses an essential point, even if it may reduce the total error. Errors are not only sources to improve accurateness of costs but also play a positive role in the management of efficiency. Secondly, we find that there is a recursive process of making cost systems more accurate. We identify that this process is on-going without necessarily converging on an optimal end-state of error level. This understanding has significant implications for designers and users of costing systems.
Keywords: costs system design, errors, process
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