Cost flow refers to the sequential movement of value variables so that a product or service get to it intended destination or object with a backward movement or breakdown. The cost flow mechanism in the manufacturing industry, merchandise and health care service is similar in many ways. In the production, it involves the financial input that an industry acquired in the process of producing a finished product. The industry inventories cost. It takes into direct consideration material, overhead, and labor cost into the processing of the product. The finished product gives the complete cost flow when the disbursement has a connection with the overhead, direct labor, and direct material. Direct material and labor are traceable to the finished goods or product. The cost in the manufacturing sector is minus direct material and direct labor. Thus, cost flow in manufacturing industry can also apply to the health care system (Epstein & Schneider, 2014) . The Toyota production system has been copied by medical service providers because they are interested in both the staff and the consumer of their services.
The health care system has complex processes of service delivery like the manufacturing industry. And because the process is complicated involving many activities, accounting systems that monitor cost flow can apply to both sectors (Popesko, 2013). And according to the Institute for Health Improvement (2005), “medical care is, in fact, delivered in extraordinarily complex organizations, with thousands of interacting processes, much like the manufacturing industry” (p.17). Principles such as the Activity Based Costing can be applied effectively in a healthcare setting. Applicable to the two industries are concepts of customer prioritization; product or service quality; staff satisfaction; and the overall cost effectiveness. The health care industry has a goal which is to deliver services to a consumer. The manufacturing company or industry's goal is to provide a product to a customer.
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References
Epstein, L. & Schneider, A. (2014). Accounting for health care professionals. San Diego, CA: Bridgepoint Education, Inc.
Institute for Healthcare Improvement. (2005). Going Lean in Health Care . Cambridge, Massachusetts. Retrieved from https://www.entnet.org/sites/default/files/GoingLeaninHealthCareWhitePaper-3.pdf
Popesko, B. (2013). Specifics of the Activity-Based Costing applications in Hospital Management. International Journal of Collaborative Research on Internal Medicine & Public Health, Vol. 5 No. 3: p. 179-186
