marginal costing

Current budgets - definition

Marginal costing statement proforma.

When managers wish to use marginal costing in their decision making process they must separate variable and fixed cost by using the marginal costing statement. Preparation of marginal costing statement help with calculation of contribution and eventually profit using marginal costing.

Here below is the proforma of the marginal costing statement:

Sales revenue
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Six (6) disadvantages of using marginal costing.

Marginal Costing is a costing technique wherein the marginal cost, i.e. variable cost is charged to units of cost, while the fixed cost for the period is completely written off against the contribution.

Disadvantages of using marginal or direct costing include the following:

Separation of costs into fixed and variable costs might be difficult, … Read the rest

9 benefits of marginal costing

9 benefits of marginal costing.

Marginal or direct costing is the accounting system in which variable costs are charged to cost units and fixed costs of the period are written off in full against the aggregate contribution.

Arguments for (benefits)  the use of marginal or direct costing include the following:

  • For non-profit planning purposes, management requires cost volume and profit relationship data, which
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Absolute assurance in auditing - meaning

6 differences between marginal costing and absorption costing.

Absorption costing is the conventional technique of ascertaining cost. It is the practice of charging or costs, both variable and fixed to operations, processes or products and it is also known as full costing technique. In other hand marginal costing is technique of presenting cost data wherein variable costs and fixed costs are shown separately for managerial decision making.

407bd differencebetweenabsorptioncostingandmarginalcosting


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What is variable costs?

Variable cost is the cost which, in aggregate, tend to vary in direct proportion to changes in volume of output or turnover.
definition of variable cost
Variable costs are of two types:

  • Linear variable cost or engineered cost. this is one in which relationship between variable cost and output can be shown as straight line in the graph.
  • Non
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