# Marginal Costing

## Limiting Factor or Principle Budget Factor

Definition and Explanation with Solved Example: Limiting factors also known as key factors or principle budget factors or governing factors which put a limit to…

## Abandonment of a Product Line

Decision for Abandonment (Close) of a Product or Department – Explanation with Solved Examples: When a product line or department of business is unable to…

## Decisions for Accepting Special Order Pricing

Accepting Special Order Pricing to use up Spare Capacity – Explanation with Solved Examples: In the short term decision making, a business must ensure that…

Explanation with Solved Example: Sometimes businesses encounter a situation where they have to decide between making a particular product themselves or to buy it from…

## Relevant and Irrelevant Costs for Short Term Decision Making

Relevant Cost – Definition and Explanation with Example: “The term relevant cost is used to describe not only changes in cost but also changes in…

## Difference between Marginal and Absorption Costing

The main difference between marginal (variable) costing and absorption costing techniques are given below: Marginal Costing (Variable Costing) Absorption Costing (1) Marginal cost is often…

## Income Statements under Marginal and Absorption Costing

Explanation with Solved Examples: In  absorption costing technique no difference is made between fixed and variable cost in calculating profits. Absorption costing statement assumes that…

## Profit Volume Chart

Definition and Explanation: “Profit volume chart is a straightforward relationship of profits to sales level”. Break even chart does not directly show the amount of profit….

## Margin of Safety

Definition – Margin of Safety (MOS): Margin of safety (MOS) is defined as; “it is the difference between the actual or budgeted sales as the case…

## Assumptions and Limitations of Break Even Analysis

Assumptions: (1) All costs can be categorized as fixed or variable costs. (2) Total fixed costs remain unchanged for all output levels. (3) Total variable…

## Break Even Chart

Explanation of the Concept of Break Even Analysis with Diagram: Break even chart may be prepared in different forms and styles; but they all in…

## Target Profits

Definition, Explanation and Formula: Every business make plan to earn a specific amount of profit for a specific fiscal year, this profit is known as…

## Break Even Point in Sales Value

Methods to Calculate Break Even Point in Sales (\$) Value: Break even point in sales (\$) value may be calculated in two ways but both…

## Break Even Point

Definition: Break even point shows the output level (units produced or services rendered) at which total revenues just equals to total costs or point at…

## Break Even Analysis

Introduction to Break Even Analysis: Definition, Use and Components of Break-even Analysis: Break-even indicates a situation where; there is no profit or loss for a…

Advantages: The main advantages of marginal costing are given below: (1) By using marginal costing technique, the assessment of various sales or production alternatives options…

## Principles of Marginal Costing

Basic principles and guidelines for using marginal costing are as follows: (1) The sale of an extra unit of product or service results in the…

## Marginal Costing

Definition and Explanation of Marginal Costing (Direct or Variable Costing): Marginal costing is simply a technique to analyze cost information for decision making process. Different terms…

## Marginal Cost

Definition and Explanation: Marginal means Extra. Marginal cost is defined by CIMA as “the cost of one unit of a product or service which would…