Activity Based Accounting For Sonic Healthcare: 739977
Executive Summary
The Sonic Healthcare is one of the known healthcare centers that have acquired great medical excellence, not only in Australia but across the globe. The headquarters are located in Sydney, with around 26, 000 employees (Manley et al., 2009). Notably, the company specializes in pathology, radiology as well as primary care. The success of the organization could be attributed to the belief that they ought to offer quality medical diagnostic services to the medical practitioners. The leadership style, as well as the relationship between the stakeholders, has established a strong culture which has ensured that the objectives listed are met (Tate et al., 2014). Notably, the organization has expanded to other places, for example, USA, Germany, Ireland and the United Kingdom among others. In all the regions, the company employs more than 500 specialist pathologists, radiologists as well as medical scientists who are approved by the management. Even though the organization is leading, there is an ongoing investment, called ‘state-of-the-art’ which is a medical technology that customizes information systems so to meet the needs of the stakeholders to the organization. Ethical standards are highly needed in this process so that it does not incur losses or lead to unmet goals.
Introduction
As stated above, Sonic Healthcare is diverse as it serves entire Australia and other regions. On the other hand, the organization offers medical assistance, indicating that the costs should be as low as possible, to assist the many patients that visit the place. More so, the organization trains health practitioners where the resources they need are purchased. This is to say that the commercial use should record and account forso as to implement their belief of offering quality and affordable services. ASX lists Sonic Healthcare as the top organization. Getting to the position is not as hard as maintaining, was the industry has stiff competition. One of how the organization could maintain the position is by becoming keen on finances and how they are used in delivering services to clients. The board of directors of the company has therefore asked for a report, regarding the Activity Based Costing (ABC). The model has been suggested, as the accounting methodology that would boost financial accountability. The aim of the paper is, therefore, to define the model and describe its features. Afterward, the mission, objectives and corporate strategies for Sonic Healthcare will be evaluated, and compared to the features of the model, to find out whether it is helpful to the organization.
Explanation of the Activity Based Costing and it features
The Activity Based Model is a costing methodology that assigns indirect costs to goods and services and identifies the cost of each activity that is involved in the production process (Evans and Schlies 2016). In short, the model allocates costs of each product that is used in the making process. The approach is most useful to the organizations that are complex, where the production process involves many procedures. Several features are evident in the ABC model, one being that it points clear distinctions between the cost behavior patterns (Dale and Plunkett 2017). In this feature, the model points out the cost patterns that are constant and those that changes. By that, it becomes easy determining the costs needed in affording the products. The other feature of the model is that the entire cost is grouped into fixed and variable costs. The feature is useful in helping organizations gain quality information while designing the right cost system in the manufacturing process. Besides, the Activity Based Model identifies the suitable cost driver while putting overheads on goods and services (Christopher 2016). In this case, the factors to be considered while allocating costs are identified, to ensure that the prices put are realistic. Pointing out the cost drivers is useful in dictating the cost behavior to be expected. Therefore, the main function of the model is to identify costs of each product that is needed in the production process, by using the cost drivers in determining the patterns of each good and service.
ABC model is significantly concerned about the allocation of overheads regarding goods and services (Mukhopadhyay 2015). In doing so, the costs are divided into short and long-term variable costs. In the short term variable costs, prices are put based on the volume related cost drivers (Subramaniam and Watson 2016). Examples of volume influence cost influencers are the direct labor duration and the right material prices. Kaplan and Cooper, in their explanation regarding the activity-based costing, claimed that the volume based cost drivers are unsuitable while allocating the long-term variable prices to goods (Dong et al. 2014). The reason that they gave is that the long-term costs are influenced by the complexity and variety of organizational activities and not the volume. With the idea, the drivers of the overhead prices ought to be understood together with the actions in the business that is related to the production and service departments. The scholars, therefore, concluded that ABC’s role is to correct the wrong information based on costs, put overheads per activity involved and enable the management take quality and timely decisions.
An Explanation of How ABC Model Aligns With Goals and Strategies of Sonic Healthcare
Identification of the Mission of the Sonic Healthcare
Sonic healthcare’s mission is to offer quality services, care as well as clinical outcomes for their patients (Sikaris 2016). The mission is ensured by several values that mostly boost interaction and communication between employees and the patients. One of the values is being committed to service, where the employees are willing to serve all people they come across. The other value is treating all people with respect and honesty, to get trust and ensure equality in treating people. There is also the aspect of being responsible and accountable where the workers own every action that they take at the workplace. Being enthusiastic and having the attitude of continuous improvement, as well as being confident at work are the other values maintained in this organization (Vandenberg et al., 2018). Through these values, the involved stakeholders put the mission into practice in making sure that quality services are offered to the clients.
Objectives for Sonic Healthcare
The main objective of Sonic Healthcare is to ensure a healthy, safe and productive surrounding for treating the patients (Allen 2017). The organization also strives to offer services that neither discriminates nor harasses people regardless of their color, religion, age, disability among others. Also, the organization aims to improve and implement aspects that pose challenges of example discrimination, to the disadvantaged people. Notably, the objectives are integrated into the culture of the organization to ensure that the planned issues are implemented into the company. Applicability of the said objectives is evident, for example, the gender and diversity and less discrimination. In the top management of the organization, male and female leaders are given equal chances and treated the same (Ebner et al., 2015). By that, all patients are treated the same just like the way workers are given equal positions. This is a unique organization, as each year, a meeting is held, where the management and workers assess how well the objectives have been met. This is vital to the organization, considering that it offers sensitive services.
Corporate Strategies for Sonic Healthcare
Sonic Healthcare has several business strategies that have given it a sense of direction in its operations. One is selecting the best technology, which has been ensured by acquiring several companies (Long et al., 2016). After the companies are acquired, the Inter Systems are assessed, to ensure that the storage needed is less, but processes information fast. This is to say that the organization ensures that the technology chosen is the best. The other strategy is ensuring that the IT used is in line with the business goals (Klettner et al., 2014). To meet this, the company has a Chief Systems Officer, who has access to all processes, systems as well as workflows, to ensure that the IT used is similar to the expectations of the organization.
Also, there is the strategy of choosing the right people. Sonic healthcare believes that dealing with the right people is the first step meeting its aims, as they would ensure that the said factors are put in practice (Collyer et al. 2015) Therefore, expecting the desired outcomes is almost certain. In doing this, the organization prefers identifying talented individuals and nurturing them to work in the organization, other than absorbing people based on qualifications. This is to say that the company prefers training its people and not getting the already trained.
Use of the Activity Based Costing In Helping Sonic Healthcare Achieve Its Strategies
As said above, the activity based costing is a costing methodology that helps the management allocates overheads to activities, based on short and long-term variables. The method is useful in determining costs that are constant and those that are changing. With that, it becomes easy while making decisions that lead to the accountability of finances in the business. Regarding Sonic Healthcare, issues of costs have affected the organization, mostly in the United States where the Obama law has insisted on reduced costs. As a result, the company has to reduce payments that are to be offered by clients. In doing this, the ABC model is helpful as each cost incurred will be accounted for and thus allocating fewer prices as possible. The strategy of getting the best technology, to meet the mission of offering quality services is possible by the application of the model. This is because the costs to be incurred in acquiring other companies will be known and the standards needed. With that, the company will not only get the best technology but will also get at the normal price. Activity-based costing is therefore highly needed by Sonic Organization. As said above, ABC model is useful to organizations that are complex in that it helps the leadership team determine prices for every activity involved. This is the case with Sonic Company where its operations are diverse and thus needing a costing methodology that would keep track of the money used by the organization.
Recommendations for ABC implementation in Sonic Healthcare
From the above description, it is clear that ABC model applies to sonic healthcare, which requires several recommendations in incorporating it into the organization. One is informing all the involved stakeholders about the model, its features as well as applicability to the business. In this case, the leadership team has to meet the stakeholders and inform them about the model. Apart from that, they should be informed about its role in the organization and the expected outcome. By that, the workers would align their responsibilities to achieving the expected outcome from the model.
The other recommendation is on training and developing objectives. In this case, the leadership team has to be trained on how to use the model, for example in allocating overheads using cost drivers, after which the employees should be trained on how to help the management in using the model, for example by providing the needed information. Establishing objectives is also helpful where aims are set to be achieved after certain duration. In doing this, the usefulness of the model would be determined and changes made where necessary.
Alternative Management Tool Appropriate To Sonic Healthcare
The suitable alternative tool useful to Sonic Healthcare is the locational based costing, which refers to allocating costs based on a region. The option is helpful to the organization, due to the aspect of the company serving populations of different regions (Guo 2018). While the ABC model concerns with activities, the locational costing would control the region which would ensure that all markets served by the company are considered. With that, the set strategies by the organization would be attained with the lowest costs being incurred.
References
Allen, P.M., 2017. Strategic Partnering to Gain Competencies for Future Healthcare Delivery. Frontiers of health services management, 34(1), pp.41-47.
Christopher, M., 2016. Logistics & supply chain management. Pearson UK.
Collyer, F., Harley, K. and Short, S., 2015. Money and markets in Australia’s healthcare system. Sydney University Press.
Dale, B.G. and Plunkett, J.J., 2017. Quality costing. Routledge.
Dong, J., Liu, C. and Lin, Z., 2014. Charging infrastructure planning for promoting battery electric vehicles: An activity-based approach using multiday travel data. Transportation Research Part C: Emerging Technologies, 38, pp.44-55.
Ebner, K., Feldkoetter, M., Ariceta, G., Bergmann, C., Buettner, R., Doyon, A., Duzova, A., Goebel, H., Haffner, D., Hero, B. and Hoppe, B., 2015. Rationale, design, and objectives of ARegPKD, a European ARPKD registry study. BMC Nephrology, 16(1), p.22.
Evans, A. and Schlies, A.J., Graham Packaging Co LP, 2016. Plastic container. U.S. Patent Application 29/486,063.
Guo, Q., 2018. Rhetoric in financial reporting: evaluation of ISA 720.
Klettner, A., Clarke, T., and Boersma, M., 2014. The governance of corporate sustainability: Empirical insights into the development, leadership, and implementation of the responsible business strategy. Journal of Business Ethics, 122(1), pp.145-165.
Long, S. and Goldblatt, J., 2016. MTHFR genetic testing: Controversy and clinical implications. Australian family physician, 45(4), p.237.
Manley, S.E., Sikaris, K.A., Lu, Z.X., Nightingale, P.G., Stratton, I.M., Round, R.A., Baskar, V., Gough, S.C.L. and Smith, J.M., 2009. Validation of an algorithm combining hemoglobin A1c and fasting plasma glucose for diagnosis of diabetes mellitus in the UK and Australian populations. Diabetic Medicine, 26(2), pp.115-121.
Mukhopadhyay, S.C., 2015. Wearable sensors for human activity monitoring: A review. IEEE sensors journal, 15(3), pp.1321-1330.
Sikaris, K.A., 2016. Post-analytical quality specifications. Pathology, 48, pp.S16-S17.
Subramaniam, C. and Watson, M.W., 2016. Additional evidence on the sticky behavior of costs. In Advances in Management Accounting (pp. 275-305). Emerald Group Publishing Limited.
Tate, J.R., Sikaris, K.A., Jones, G.R., Yen, T., Koerbin, G., Ryan, J., Reed, M., Gill, J., Koumantakis, G., Hickman, P. and Graham, P., 2014. Harmonising adult and pediatric reference intervals in Australia and New Zealand: an evidence-based approach for establishing the first panel of chemistry analytes. The Clinical Biochemist Reviews, 35(4), p.213.
Vandenberg, O., Kozlakidis, Z., Schrenzel, J., Struelens, M.J. and Breuer, J., 2018. Control of Infectious Diseases in the Era of European Clinical Microbiology Laboratories Consolidation: New challenges and opportunities for the Patient and the Public Health Surveillance. Frontiers in Medicine, 5, p.15.
