Marginal Costing | PAPER III – ACCOUNTING & FINANCIAL MANAGEMENT FOR BANKERS | MODULE D: TAXATION AND FUNDAMENTALS OF COSTING
Marginal Costing and Absorption Costing - Bank Theory Marginal Costing and Absorption Costing Meaning Marginal Costing is a costing technique where only variable costs are considered for product costing and decision-making. Fixed costs are treated as period costs and charged against the revenue of the period. Advantages Helps in decision making (e.g., pricing, product mix) Simplifies cost control Facilitates breakeven and CVP analysis Limitations Ignores fixed costs in product valuation Not suitable for external reporting Assumes linear cost behavior Applications Decision making in pricing, product discontinuation Make or buy decisions Profit planning Breakeven Analysis & Cost-Volume-Profit (CVP) Analysis Breakeven Point = Fixed Costs / Contribution per Unit CVP analysis studies the rel...