Health care finance Essay Example | Topics and Well Written Essays - 500 words - 1

Health care finance - Essay Example sults are preferable than the expected results, the variable is favorable (F).on the other hand, if the actual results are not as good as the expected results, the variance is an adverse (A) (Murphy and Wood 275). There are two kinds of budgets from the accounting point of view: capital budgets and operating budgets. Budgets are characterized by such programs as operations, maintenance, security, and environmental among others. Operating budget is a term used to refer instances when informal conversations within an organization turn to the budget. Facility managers usually have more control over operating budgets as compared to the capital budget. They symbolize out-of-pocket costs that organizations try to avoid (Murphy and Wood 277). They can be either short-term or mid-term. Capital budgets, on the other hand, are comparatively static. They involve less scrutiny, longer terms, and fewer cost types. They are sensitive to the management of operating budgets. Cost measurement has been found very effective in the maintenance of operating and capital budgets through the variance analysis. Effective and efficient budgeting in the control of operating costs is an essential part in the attempt to increase the value of a business over time. Operating budgeting should, therefore, analyze strategies for capital budgeting and strive to increase efficiency (Warren, et.al 31). For this to be accomplished there is a need for integrated budget planning. The budgeting process and business planning should offer this opportunity. Cost measurement has, however, been the most effective manner through which this efficiency is achieved. There are two major methods of measuring costs in the attempt to maintain operating and capital budgets effectively. One of these methods is the total absorption costing method (Warren, et.al 31). This involves making an attempt to achieve the full cost in the production of a single unit of an item by making an account of all production costs both