What is marginal costing?

Understanding Marginal Costing

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University
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1.
FLASHCARD QUESTION
Front
Back
Marginal costing is a costing method that includes only variable costs in product costing and treats fixed costs as period costs.
2.
FLASHCARD QUESTION
Front
How does marginal costing differ from absorption costing?
Back
Marginal costing includes only variable costs, while absorption costing includes both variable and fixed costs.
3.
FLASHCARD QUESTION
Front
What are the key components of marginal costing?
Back
Key components of marginal costing are variable costs, fixed costs, contribution margin, and decision-making impact.
4.
FLASHCARD QUESTION
Front
Explain the concept of contribution margin.
Back
The contribution margin is the difference between sales revenue and variable costs, indicating the amount available to cover fixed costs and generate profit.
5.
FLASHCARD QUESTION
Front
How is the break-even point calculated using marginal costing?
Back
Break-even Point (in units) = Fixed Costs / (Selling Price per Unit - Variable Cost per Unit)
6.
FLASHCARD QUESTION
Front
What role does marginal costing play in decision-making?
Back
Marginal costing aids decision-making by analyzing variable costs and contribution margins to optimize profitability.
7.
FLASHCARD QUESTION
Front
What are the advantages of using marginal costing?
Back
Advantages of using marginal costing include better decision-making, simplified cost control, effective pricing strategies, and clear insights into profitability.
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