Introduction
A job order costing system is an approach to estimating the costs of production for goods produced in batches. The approach differs from process costing in the sense that the job order costing system calculates costs for products manufactured in batches and are of different types, while process costing deals with homogeneous goods produced in one process. The job order costing system is commonly used as compared to other methods of cost. This paper carries out a review of the job order costing system for Greenville Hospital System Medical Center.
About Greenville Hospital System Medical Center
Greenville Hospital System Medical Center, based in South Carolina, is one largest health care providers in the state. The Center was founded in 1912 as a City Hospital. It was later established in 1947 by the Act of the South Carolina Legislature. The Center employs over 9,500 people and about 1,100 physicians. The System has a capacity of over 1,000 beds. It is a nonprofit center that also provides medical training to various registered students. Further, it participates in a number of research studies in the United States of America. The research studies are aimed at improving medical services in America. The System has a number of facilities such as trauma centers, chest pain centers, children’s hospitals, pediatric ICU, cancer, rehabilitation, behavioral health, and wellness services, among others. Therefore, it is evident that the output of the hospital is diverse and calls for the use of a job order costing system.
How the hospital will adopt the job order costing system
As mentioned above, the medical system is broken down into several units. These units provide different services to clients who walk in. The job order system will provide the clients with the true cost of the services they consume. An example of job order costing for laboratory tests is shown below.
From the table above, the cost of each patient increases as the number of hours spent by each patient increases. This method takes into account the diverse nature of services provided by the hospital. Thus, clients who require more attention and specialized services are likely to pay more, as in the case of patient three. Further, it is clear that the job order costing gives the true cost of each job carried out in the hospital. Finally, the costs generated by the system gives as much direct cost as possible. Thus, customers do not feel the burden of paying for services they do not consume.
Advantage and a disadvantage of job order costing system
One advantage of job order costing is that it provides the management with information relating to the jobs carried out. This can be attributed to the fact that job order costing produces ongoing results. This enables close monitoring and evaluation of product costs. One disadvantage of this approach is that it does not give information on the costing of departments. It only focuses on the costing of units produced and not units. This might pose a challenge in control departmental costs.