The achievement of full costing of outputs through capital charging is derivable as immediate capital expenditure is considered in adjusting the market value of an asset. For example, the company applied improvements to its assets for the objective to maximize floor space and reduce rental costs. The previous market value of the assets without the improvement will be revised to include expenditure associated with site improvement. In effect, costing the properties of the firm in the financial reports will reflect the improvement which can signal to the market that the company has improved its assets. The extent however is limited to reflect full cost of assets existing in the balance sheet. Costing human resources will be less uplifted because capital charging only applies on real assets. As a result, even though the company’s property is applied with increase in labor force or salaries, full costing will not be accounted.
Credit:ivythesis.typepad.com
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