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applications of marginal costing
Marginal costing is an accounting technique that charges variable costs to cost units while writing off fixed costs for the period. It is useful for short-term decision making where fixed costs are excluded. There are four main applications of marginal costing: cost control, profit planning, performance evaluation, and decision making. Marginal costing can help with decisions like fixing selling prices, making or buying, selecting an optimal product mix, and understanding the effect of changes in sales price.
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Introduction of marginal costing as variable costing, its definition, and significance in decision-making.
Marginal costing aids in management decisions, focusing on cost control, profit planning, and short-term decision-making.
Expresses gratitude, wrapping up the presentation on marginal costing.
applications of marginal costing
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- 2. MARGINAL COSTING -INTRODUCTION Variable costing or direct costing Marginal costing is defined by CIMA London as ‘the accounting system in which variable cost are charged to cost units and fixed costs of the period are written off in full, against the aggregate contribution. Its special value in decision making’. Marginal cost is the additional cost of producing additional unit.
- 3. APPLICATIONS Marginal costing techniqueused for providing assistance to the management in vital decision making, especially in short term decisions where fixed costs are excluded. There are mainly four applications of marginal costing:- Cost control Profit planning Performance evaluation Decision making:
- 4. Marginal cost helpsin short term decisions like: • Fixation of selling price • Make or buy decisions • Selection of good product mix • Effect of changes in sales price
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