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Activity Based Costing & The NHS Financial Analysis - (MN2007) Assignment 2 1. Introduction As the Management Accountant of a local NHS hospital I am going to write a report for the senior management team at the hospital that analyses the issues raised in the view attributed to Gordon Brown. It is difficult to assume which allocation approach the hospitals have used, but I am going to describe the Traditional Costing approach and the Activity Based Costing approach, which I will describe in more detail. 2. The Definition of Activity Based Costing Activity Based Costing (ABC) is a 'costing method' (Fleming & McKinstry, 1998: 216), which recognises that costs are incurred by the activities, which take place within the organisation, and for each activity a cost driver may be identified. Those costs, which are incurred or driven by the same cost drivers, are grouped together into cost pools and the cost drivers are then used...

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