Standard costing vs marginal costing

Answer 1

The average cost is the total cost of production of x units of the product divided by x. Marginal cost refers to the additional amount required to produce the x+1th unit. This does not have to be the average of the cost of x units.

For example if a company can produce 1000 products a day for $5000, the average cost is $5. But to make 1001 products per day it may not be possible to do the same with the machinery they have, instead they may need to buy additional machinery. If this makes the cost of producing 1001 products $5020, the marginal cost of the 1001th product is $20.

It is the first derivative of total cost with respect to the quantity. This makes marginal cost independent of the fixed cost and dependent only on the function of the variable cost.

Answer 2

Standard costing is that in wch ne target is set and we have to achieve that target .And in marginal costing we did'nt need to set any target in this we read out about the behaviour of cost and this teqnique is used to analyse performance and for profit planning ,fixing prices and most important cost contol .