Marginal Costing Question:
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Explain Features of Marginal costing?
Answer:
Features of Marginal costing:
- It is a method of recoding costs and reporting profits.
- It involves ascertaining marginal costs which is the difference of fixed cost and variable cost.
- The operating costs are differentiated into fixed costs and variable costs. Semi variable costs are also divided in the individual components of fixed cost and variable cost.
- Fixed costs which remain constant regardless of the volume of production do not find place in the product cost determination and inventory valuation.
- Fixed costs are treated as period charge and are written off to the profit and loss account in the period incurred.
- Only variable costs are taken into consideration while computing the product cost.
- Prices of products are based on variable cost only.
- Marginal contribution decides the profitability of the products.
- It is a method of recoding costs and reporting profits.
- It involves ascertaining marginal costs which is the difference of fixed cost and variable cost.
- The operating costs are differentiated into fixed costs and variable costs. Semi variable costs are also divided in the individual components of fixed cost and variable cost.
- Fixed costs which remain constant regardless of the volume of production do not find place in the product cost determination and inventory valuation.
- Fixed costs are treated as period charge and are written off to the profit and loss account in the period incurred.
- Only variable costs are taken into consideration while computing the product cost.
- Prices of products are based on variable cost only.
- Marginal contribution decides the profitability of the products.
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