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Adsorption Costing Or Full Costing

Adsorption costing or full costing can be defined as the method of accumulating all costs spent on the production of a particular product by taking into consideration both indirect and direct expenses. All factors are considered when evaluating the price of the commodity and can be calculated by adding direct raw materials, direct labor, and variable and fixed overhead costs. 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 labor, and variable overhead costs. It is the portion of the cost of one unit of production. Variable cost changes as the output changes. Different methods will provide different values, hence the need to make the right choice of method to be used. Marginal cost should be done alongside absorption costing.

The provision of better health care at minimum cost is one of the issues in NHS. It can be difficult for cost NHS since most of the salaries and supplies are in different specific departments, different departments have a range of resources, and patient consumption also varies. And the intangible nature of the service product. The allocation method is done on direct costs, e.g., salaries and fixed equipment used, indirect costs of maintaining the administrative unit, and fixed expenses such as water and electricity. There is more pressure to control the labor cost, and appropriate costing of labor becomes difficult. Marginal costing focuses on fixed value in the hospital and provides 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).


Ellwood, S., 1995. NHS costing for contracting rules. Public Money & Management15(2), pp.41-47.
Pyke, C.J., 1998. Costing and pricing in the public sector. Financial Management for the Public Services, p.77.



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