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What are the application on marginal costing for managerial decision?
Wiki User
∙ 11y ago
Marginal costing is used by an organization for taking many policy decisions
The various areas are
1)Alternative methods of production
2)fixation of selling point
3)Balancing of profits
4)New product introduction
5)Buy or make decisions
Wiki User
∙ 11y ago
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Is the marginal costing called direct costing?
Yes marginal costing is also sometimes called direct costing.
What is marginal costing techniques?
There are two type of costing are involved in a product or service. ie Direct cost and Indirect cost. In this two head there are two sub type costing are involved. ie Varriable cost and Fixed cost. Here the the total varriable cost are involved in a product of cost is called marginal costing. In another way the totoal cost -fixed cost is called marginal costing By M.Magesh 099948 33079
Why marginal costing method not Suitable to be used by manufacturer for external financial reporting and tax purpose?
I think..... In marginal costing method only variable cost is considered as product cost and fixed cost is not considered as product cost. But in reality product cost include fixed and variable, thus both variable and fixed costs should be considered while allocating cost. Marginal costing is used for inside reporting and absorption costing is used for outsider to clarify the real cost of product........ Am i right? Please confirm it
Marginal versus variable costing?
Variable cost refers to the TOTAL variable cost of all units, whereas marginal cost is the variable cost of the last unit only. Variable cost is the sum of all the individual marginal costs. The derivative of the Variable Cost is the Marginal Cost. The integral of the Marginal cost is the Variable Cost.
How do variable costing and absorption costing differ?
marginal costing is also known as contribution costing. its a costing method that's includes only a variable cost of a product no attempt is made to allocate or appropriate fixed costs to cost centers. the setting of prices is basically based on the variable costs of making a product. if the prices are set above this unit cost then each item sold will make a condition to fixed costs. on the other hand absorption costing or full costing is an approach to the costing of products that allocated all costs of production to cost centers. The aim is to ensure that all business costs are covered.
Marginal costing is useful in?
Marginal costing is one of the technique of costing and is usefull for the decision making process. As in decision making process decision are always made for the future activities and not for past activities so if exept marginal costing any other costing method for example absorption costing method is used then there is a chance of making wrong decisions as in future decision making past decision and past data is not relevent for decision making.
State the arguments for using marginal costing approach in routine accounting?
- The Marginal costing technique is appropriate for decision making as it highlights those costs (and revenues) which will change as a result of the decision under review being put into effect. - As fixed costs are mostly overheads, and, under marginal costing these are all treated as period costs and charged into the income statement therefore marginal costing avoids arbitrary allocation of overheads to units of output. - Reporting profit on a marginal costing basis will be more closely relates to changes in sales volume and are less affected by changes in inventory levels. - An understanding of the behavior of costs and the implications of contribution is vital for accountants and managers as the use of marginal costing for decision making is universal.
Limitation and assumption of marginal costing?
assumption of marginal costing
Is the marginal costing called direct costing?
Yes marginal costing is also sometimes called direct costing.
When to use marginal costing?
Marginal costing is the method of costing for evaluating the changes in total cost due to change in number of units produced.
Difference between absorption and marginal costing?
marginal costing is recommended by IAS and absorption costing is not recommended by IAS,marginal costing is used for internal purposes and absorption costing is ysed for external purposes,in marginal costing the fixed production overheads are not calculated as a product cost and in absorption costing the fixed prodution overheads are calculated as product cost.
What are the uses of marginal costing and absorption costing?
to calculate the profit easilly
Is direct costing the same as variable costing?
Variable costing is called marginal costing while direct costing is separate concept.
Marginal costing and absorption costing which is favourable?
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Limitations of marginal costing?
in marginal costing key factor and limitation factor is also available which may put limits on produduction unit and sales unit.
How is marginal and differential costing used as a tool for decision making?
The Marginal or differential accounting has the basic rule that this accounting method donot consider decisions made previously and only considers the decisions effecting the future so only that information is used for future decision making which is going to effect or change the future decisions and don't considers the decisions made before. So past information is not relevent for future decision making and this is also the main rule which is used by this accounting method if we use other accounting methods like absorption costing for decision making in the end there is a chance to make wrong decisions.
What is the Importance of marginal costing in decision making?
Marginal cost is change in total cost due to increase or decrease one unit or output. It is technique to show the effect on net profit if we classified total cost in variable cost and fixed cost.
