Introduction and Learning objectives of Marginal Costing
Marginal costing is a technique of costing. This technique of costing uses the concept `marginal cost’. Marginal cost is the change in the total cost of production as a result of change in the production by one unit. Thus marginal cost is nothing but variable cost. In marginal costing technique only variable costs are considered while calculating the cost of the product, while fixed costs are charged against the revenue of the period. The revenue arising from the excess of sales over variable costs is known as `contribution’. Using contribution as a vital tool, marginal costing helps to a great extent in the managerial decision making process. This unit deals with the various aspects of marginal costing.
- After reading this lesson, the reader should be able to:
- know the meaning of marginal cost.
- understand the various elements of marginal costing technique.
- appreciate the importance of marginal costing as a decision making tool.
- realise the advantages and disadvantages of marginal costing.
- apply marginal costing technique under appropriate situations.
Tags : Accounting For Managers - Management Accounting-Marginal Costing
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