Activity-based costing defined

Mentioned costs of design, construction and disposal are relatively easy to define, however costs related to the usage phase is much more complicated. To describe all cash flows occurring in that phase Activity Based Costing (ABC) was applied (Sierpinska Niedbala 2003). This method assigns indirect overhead costs and activity costs to the objects, facilities, systems devices, and uses cause—effect relations between factors that generate costs and activities. In other words the ABC concept allows the grouping of the costs by actions i.e. causes of cost. 

This is the point at which the principles of activity-based costing and mission costing coincide. The basic tenet of ABC is that the activities that generate cost should be defined and the specific cost drivers involved identified. These may be the number of lines on an order, the people involved, the inventory support or the delivery frequency. 

The cost projections are based on assumptions and costs developed from pilot test data. The 12 categories defined to reflect the cleanup activities are as follows ... 

Process improvements may be conducted by the completion of a task or a project. A task is an activity that can be completed by the process owner with minimal cost and/or resources over a short period of time. A project is defined as temporary work to provide a product or service that is beyond the process owner s support. In general, a project requires more than one full-time equivalent (FTE), crosses over multiple functional organizations, and the duration of the effort spans over a longer period of time. Improvement status, updates, and issues should be discussed on a regular basis by a management forum or steering committee. Tasks and projects should be prioritized based on the risk against patient safety and efficacy and compliance. 

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