Cost analysis for ophthalmic clinics services

Abstract

To present a model of cost allocation for ophthalmic clinics services using cost versus price approach and to evaluate the cost information as a management tool as well as an instrument for cost control and decision-making. Methods: The model was tested applying various costing methodologies: absorption costing, full costing, direct costing and activity based costing. Cost allocation systems were installed in three ophthalmic clinics services with the objective of arriving at the cost of procedures conducted in the period september to november of 2003; data was obtained through financial and management reports and field interviews with staff. Results: The costing system met its objectives: the larger ophthalmic clinic demonstrates a better cost-benefit relationship given its larger volume and variety of procedures and distribution base to spread its fixed costs. With regard to the cost-charge ratio some procedures were found to be profitable and others with low or negative operating results, illustrating the need for cost control to determine profitable services as well as pricing. Conclusion: The proposed model is advantageous for both disseminating and utilizing cost information as well as providing support for management in its decision-making and negotiating activities with potential buyers.