Absorption costing, marginal cost and marginal costing, Cost Accounting

Absorption Costing, Marginal Cost and Marginal Costing

Absorption costing is most often utilized for routine profit reporting and must be utilized for financial accounting reasons. Marginal costing gives better management information for decision-making and planning.

Marginal cost is a significant measure in marginal costing, and it is computed like the difference among sales value and variable or marginal cost.

In marginal costing, fixed production costs are treated like period costs and are written off like they are incurred. Within absorption costing, fixed production costs are absorbed into the cost of units and such are carried forward in stock to be charged against sales for the next time.  Stock values utilizing absorption costing are consequently greater quite than those computed utilizing marginal costing.

Reported profit figures utilizing absorption costing or marginal costing will differ whether there is any change in the level of stocks in the period. If production is equivalent to sales, there will be no difference in computed profits using these utilizing methods. SSAP 9 recommends the employ of absorption costing for the valuation of stocks in financial accounts. There are some number of arguments mutually for and against each of the cosign systems. The distinction between of absorption costing and marginal costing is very significant and it is vital such you now understand the contrast with the two systems.

Posted Date: 2/7/2013 12:15:26 AM | Location : United States







Related Discussions:- Absorption costing, marginal cost and marginal costing, Assignment Help, Ask Question on Absorption costing, marginal cost and marginal costing, Get Answer, Expert's Help, Absorption costing, marginal cost and marginal costing Discussions

Write discussion on Absorption costing, marginal cost and marginal costing
Your posts are moderated
Related Questions
A company constructs a building for its own use. Construction began on January 1 and ended on December 30. The expenditures for construction were as follows: January 1, $550,000; M

How the FIFO, LIFO and AW problems can be solved?

Sleep Corporation was organized on January 1, 2011. During its first year, the corporation issued 40,000 shares of $5 par value preferred stock and 400,000 shares of $1 par value c

for the year ended31st dec 2008manufacturing accountshowing costof row material,manufacturing expenses and the cost of goods manufactured& tradind account where stock of row mater

1.  Prepare a cash flow forecast for the proposal to launch SafeCus in 2010 for a three-year period from 1 January 2010 using the data in the body of the Case Study and discount at

1. The table below gives data for Southland where there are three consumption goods: bananas, coconuts and grapes. Goods Quantity in base period basket

UTILITY OF BREAK EVEN POINT IN MANAGERIAL DECISION MAKING 1. It assists in determination of sales mix 2. It assists in exploring new markets 3. It assists in deciding abo

MX obtains 80% of the 1 million issued $1 ordinary share capital of FZ on 1 May 2009 for $1,750,000 when FZ's reserved earnings were $920,000. The carrying worth was considered

Piece Rate System - Labour Remuneration However an employee is paid a fixed amount for all units produced irrespective of time in use; the wages payable are computed like fo

what is cost