Costing is highly important in business activity. Labor costing is an essential element in calculating the total cost incurred during performance of an activity. Generally, cost per output and outcome are important components in costing. Cost per output implies the total compensation in the factors of production for a particular amount of output. For a human service agency, cost per output would be the total labor cost per specific quantity output. This is an important phenomenon which is used to analyze the ratio between the productivity of labor in relation to the quantity of output.
If the change were disproportionate to the percentage change in output, then the labor productivity would be lower. It would imply that the cost for production of increasing amount of output would be higher than the threshold with which the output increases. Such changes in units of inputs/labor would reflect the effect of the net changes in the worker’s compensation which relates to his productivity. (Sparrow, Brewster, Harris, 2004) Unit costs will substantially cause upward shifts to the firm’s marginal cost and average cost curves. Increasing labor cost per output will then reduce the profits of the organization.
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Cost per outcome is the average change in the cost of programs over the number of the programs. It is obtained by dividing the total cost of the outcomes by their number. It is important in analyzing the change in the cost for the different outcomes. Outcomes in human resource agency could be the total number of activities and bunches of output produced/performed by the workers as a whole. For every outcome is a labor cost variable attached d to it. However, cost per outcome may be increasingly adverse for different outcomes when compared to the productivity of labor.
Cost per outcome is important in studying the relationship between the labor costs involved in the outcome and the relative revenue implied by the outcome. It measures the efficiency with which the total outcome benefit responds to the total labor. It measures the state of cost-benefit efficiency between labor use and the benefits for various activities within an organization. (Sparrow, Brewster, Harris, 2004) Reference. Sparrow, P, Brewster, C & Harris, H. , (2004) Globalizing Human Resource Management. London: Routledge.
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