Archive | Marginal Costing

Marginal Costing: Meaning, Characteristics and Assumptions

After reading this article you will learn about Marginal Costing:- 1. Meaning of Marginal Costing 2. Basic Characteristics of Marginal Costing 3. Assumptions 4. Advantages 5. Limitations. Concept: Meaning of Marginal Costing Basic Characteristics of Marginal Costing Assumptions of Marginal Costing Advantages of Marginal Costing Limitations of Marginal Costing 1. Meaning of Marginal Costing: The […]

Income Determination under Absorption and Marginal Costing

After reading this article you will learn about Income Determination under Absorption and Marginal Costing. Under absorption costing, fixed costs are treated as product costs while marginal costing excludes fixed costs from product costs. The example given here illustrates the method of income determination under absorption and marginal costing: Example: In the two income statements […]

Calculating Contribution and Marginal Costing

Contribution is the difference between sales and variable cost or marginal cost of sales. It may also be defined as the excess of selling price over variable cost per unit. Contribution is also known as Contribution Margin or Gross Margin. Contribution being the excess of sales over variable cost is the amount that is contributed […]

Managerial Problems and Marginal Costing

This article throws light upon the ten major managerial problems in application of marginal costing. The problems are: 1. Pricing Decisions 2. Profit Planning and Maintaining a Desired Level of Profit 3. Make or Buy Decisions 4. Problem of Key 5. Selection of a Suitable or Profitable Sales Mix 6. Effect of Changes in Sales […]

Profit Volume Ratio (With Formula and Calculation)

After reading this article you will learn about Profit-Volume Ratio. The Profit/volume ratio, which is also called the ‘contribution ratio’ or ‘marginal ratio’, expresses the relation of contribution to sales and can be expressed as under: P/V Ratio = Contribution/Sales Since Contribution = Sales – Variable Cost = Fixed Cost + Profit, P/V ratio can […]

Cost Analysis and Marginal Costing

After reading this article you will learn about the Similarities and Dissimilarities between Differential Cost Analysis and Marginal Costing. Similarities: Most often, marginal costing and differential costing are used as synonymous. But the two are not exactly the same in all respects. The points of similarity and difference between the two are summarised as follows: […]

Marginal Costing: Meaning, Need and Advantages

In this article we will discuss about Marginal Costing:- 1. Meaning of Marginal Costing 2. Need for Marginal Costing 3. Ascertainment of Profit 4. Features 5. Advantages 6. Limitations. Contents: Meaning of Marginal Costing Need for Marginal Costing Ascertainment of Profit under Marginal Costing Features of Marginal Costing Advantages of Marginal Costing Limitations of Marginal […]

11 Main Areas of Marginal Costing | Cost Accounting

The following points highlight the eleven main areas of marginal costing. The areas are: 1. Fixation of Selling Prices 2. Key Factor 3. Make or Buy Decision 4. Selection of a Suitable Product Mix 5. Effect of Change in Sales Price 6. Maintaining a Desired Level of Profits 7. Alternative Methods of Production 8. Cost […]

Income Determination under Marginal and Absorption Costing

The following points highlight the four cases of income determination under marginal costing and absorption costing. The cases are: 1. When there is Production but no Sales 2. When Production is Equal to Sales 3. When Production is more than Sales 4. When Production is Less than Sales. Income Determination under Marginal Costing and Absorption […]

Top 4 Applications of Marginal Costing | Cost Accounting

The following points highlight the top four applications of marginal costing. The applications are: 1. Cost Control 2. Profit Planning 3. Evaluation of Performance 4. Decision Making. Marginal Costing: Application # 1. Cost Control: Marginal costing divides the total cost into fixed and variable cost. Fixed cost can be controlled by the top management and […]

shopify traffic stats