Marginal Costing - Dani Ki Costing
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Marginal Costing - Dani Ki Costing - CA IPCC Video Lectures | Marginal Costing - Dani Ki Costing - CA IPCC Video Lectures | Marginal Costing - Dani Ki Costing - CA IPCC Video Lectures | Marginal Costing - Dani Ki Costing - CA IPCC Video Lectures
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Marginal Costing
Marginal Cost is change in the cost due to change in the volume of
output. In simple words marginal cost is increase in variable cost on increase
of unit of output as compared to the basic units. Variable cost is calculated
by aggregating the costs of direct material, Direct Labor, Direct Expenses and
Variable Overheard. Marginal cost can be calculated for a single article, a
batch, an order or stage of product.
While calculating marginal cost, all the cost elements are
classified into fixed and variable cost. The profitability in case of marginal
costing is determined with reference to their contribution margin. Marginal
costing is a common method and not a distinct method. Marginal costing
ascertains costs on the basis of the nature of the cost. Marginal Costing is
helpful in decision making process.
In marginal costing, marginal cost remains constant per unit of
output while the fixed cost is fixed for a period. Thus marginal costing is a
simplified pricing policy. Marginal costing is of great significance in showing
the realistic profit. It also helps to take the decision regarding how much
quantity should be produced so that the cost comes to minimum and the profit
derived comes to maximum. It helps in bringing more control over expenditure.
Inspite of such advantages, Marginal costing technique has certain
limitations of it. To calculate marginal cost, it is necessary to classify cost
as fixed and variable but it is very difficult to classify the same. Marginal
costing is based on estimations but many a times it may happen that, nature of
certain costs are unidentifiable. In such a case the marginal costing so
estimated becomes unrealistic.
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