What is the primary goal of the first phase in cost determination?

The primary goal of the first phase in cost determination is to identify allowable costs by department. In this phase, organizations need to gather, categorize, and analyze all costs associated with their operations, broken down by departmental functions. This thorough identification is crucial for various reasons, including compliance with regulatory guidelines, understanding spending patterns, and making informed decisions about resource allocation. By determining which costs are allowable, healthcare organizations can establish accurate financial benchmarks, track expenditures effectively, and create a foundation for subsequent phases of cost management and analysis.

Although assessing overall company performance, improving patient care services, and budget allocation based on predictions are important aspects of financial management, they typically come after the initial identification of costs. Proper cost identification informs these broader initiatives, enhancing their effectiveness and accuracy.