What Is Marginal Costing And Absorption Costing?

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Lily James Profile
Lily James answered

Marginal Costing is basically the variable cost of that product. It is usually taken in terms of the cost of direct labor, direct material, direct expenses variable part of overheads. It is an accounting system where the variable costs are charged to cost units and fixed costs are written off in full against the aggregate. It is also known as direct cost or contribution cost.

On the other hand, Absorption Costing is also known as total cost. This costing approach does not differentiate between variable and fixed cost while calculating the profits. The items of stock are costed while including the fixed production overhead as well as the variable production overhead.

Anonymous Profile
Anonymous answered
What do you understand by marginal costing?states its usefulness as a tool for corporate decision and bring out the limitations of marginal costing.
thanked the writer.
Anonymous
Anonymous commented
What do you understand by marginal costing?states its usefulness as a tool for corporate decision and bring out the limitations of marginal costing.

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