WK5 DQ2.docx - Marginal costing is the accounting system in which variable costs are charged to cost units and fixed costs of the period are written off

WK5 DQ2.docx - Marginal costing is the accounting system in...

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Marginal costing is the accounting system in which variable costs are charged to cost units and fixed costs of the period are written off in full against the aggregate contribution. The marginal cost of an item is its variable cost. The marginal production cost of an item is the sum of its direct materials cost, direct labor cost, direct expenses cost and variable production overhead cost. So as the volume of production and sales increases total variable costs rise proportionately (Kaplan, 2012). Marginal cost changes 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. The ascertainment of marginal costs and of the effect on profit of changes in the volume of the type of output by differentiating between fixed costs and variable costs. In marginal costing, marginal cost is always equal to variable cost or cost of goods sold (Vinod, 2011). Marginal costing is very helpful in managerial decision making. Management's production and cost and sales decisions may be easily affected by marginal costing (Vinod, 2011). That is the reason, it is the part of a cost control method of cost
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  • Spring '18
  • professor newerze
  • Vinod

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