Marginal Costing

                                                                                                                                       

MBA

Accounting for Managers

ASSIGNMENT

 

Course Code: MMPC-004

Assignment Code: MMPC-004/TMA/JULY/2022 

Coverage : All Blocks

2. Explain the following

(a) Marginal Costing

Marginal costing is a cost accounting technique that determines the cost of producing a unit of a product by considering only the variable costs incurred in its production. In marginal costing, fixed costs are treated as period costs and are not allocated to products. Thus, only the direct costs of materials, labor, and variable overheads are considered while determining the cost of a product. 

The term "marginal" refers to the extra or incremental cost of producing one more unit of a product. It is the change in total costs that results from producing one additional unit. The marginal cost includes only the variable costs that change with the level of production, such as direct materials, direct labor, and variable overheads.

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