Adsorption Costing or Full Costing

Published: 2021-07-07 00:12:23
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Category: Management

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Adsorption costing or full costing can be defined as the method of accumulating all cost spent on the production of a particular product by taking into consideration both the indirect and the direct expenses. All factors are considered in evaluating the price of the commodity and can be calculated by adding direct raw materials, direct labour, variable and the fixed overhead cost. Marginal costing is the variable cost of the product. The fixed fee is charged against revenue, and hence only the variable is considered. It includes the direct cost of materials, any direct cost expenses, direct labour and variable overhead cost. It is the portion of the cost of one unit of production. Variable cost changes as the output changes. Different methods will provide different value hence the need to make the right choice of method to be used. Marginal cost should be done alongside absorption costing. Provision of better health care at minimum cost is one of the issues in NHS. It can be difficult for costing in NHS since most of salaries and supplies are in different in specific departments, different departments have a range of resources and patient’s consumption also varies. And intangible nature of the service product. Allocation method is done on direct cost, e.g. salaries and fixed equipment used, indirect cost of maintaining the administrative unit, and the fixed expenses such as water and electricity. There is more pressure to control the labour cost, and appropriate costing of labour becomes difficult. Marginal costing focuses on fixed value in the hospital and providing insight into unproductive resources. It is essential in decision making in the hospital regarding utilisation and distribution of resources.Managers are responsible for deciding feature resources (Pyuke 1998)ReferenceEllwood, S., 1995. NHS is costing for contracting rules. Public Money & Management, 15(2), pp.41-47. Pyke, C.J., 1998. Costing and pricing in public sector. Financial Management for the Public Services, p.77.

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