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What is marginal costing?
- a)Assigning standard costs to goods or services based on budgeted amounts
- b)Assessing the difference between standard costs and actual costs
- c)Calculating the impact of adding one additional unit into production
- d)Determining the impact of varying levels of costs and volume on operating profit
Correct answer is option 'C'. Can you explain this answer?
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Most Upvoted Answer
What is marginal costing?a)Assigning standard costs to goods or servic...
Marginal costing is a technique used in cost accounting to determine the impact of adding one additional unit into production. It focuses on the variable costs incurred in producing an additional unit, rather than considering the total cost of production. This approach helps in decision-making by providing information about the cost and profitability of producing additional units.
Key Points:
1. Definition of Marginal Costing:
- Marginal costing is a costing technique that analyzes the impact of changes in costs and volume on the profitability of a company.
- It separates fixed costs from variable costs and concentrates on the behavior of variable costs.
2. Calculation of Marginal Cost:
- Marginal cost is the additional cost incurred in producing one more unit.
- It is calculated by subtracting the cost of producing the current level of output from the cost of producing the next level of output.
3. Importance of Marginal Costing:
- Marginal costing helps in decision-making by providing relevant cost information for various scenarios.
- It helps in determining the profitability of producing additional units and assists in pricing decisions.
- It aids in determining the breakeven point and assessing the impact of changes in costs and volume on profit.
4. Advantages of Marginal Costing:
- It provides a clear understanding of the cost behavior and helps in cost control.
- It simplifies decision-making by focusing on relevant costs and benefits.
- It facilitates the determination of selling prices by considering variable costs.
5. Limitations of Marginal Costing:
- It ignores fixed costs, which may result in misleading profitability figures.
- It assumes a linear relationship between costs and volume, which may not hold true in all situations.
- It does not consider the long-term effects of production decisions.
In conclusion, marginal costing is a technique that calculates the impact of adding one additional unit into production. It helps in decision-making by providing information about the cost and profitability of producing additional units. However, it is important to consider its limitations and incorporate other factors when making strategic decisions.
Key Points:
1. Definition of Marginal Costing:
- Marginal costing is a costing technique that analyzes the impact of changes in costs and volume on the profitability of a company.
- It separates fixed costs from variable costs and concentrates on the behavior of variable costs.
2. Calculation of Marginal Cost:
- Marginal cost is the additional cost incurred in producing one more unit.
- It is calculated by subtracting the cost of producing the current level of output from the cost of producing the next level of output.
3. Importance of Marginal Costing:
- Marginal costing helps in decision-making by providing relevant cost information for various scenarios.
- It helps in determining the profitability of producing additional units and assists in pricing decisions.
- It aids in determining the breakeven point and assessing the impact of changes in costs and volume on profit.
4. Advantages of Marginal Costing:
- It provides a clear understanding of the cost behavior and helps in cost control.
- It simplifies decision-making by focusing on relevant costs and benefits.
- It facilitates the determination of selling prices by considering variable costs.
5. Limitations of Marginal Costing:
- It ignores fixed costs, which may result in misleading profitability figures.
- It assumes a linear relationship between costs and volume, which may not hold true in all situations.
- It does not consider the long-term effects of production decisions.
In conclusion, marginal costing is a technique that calculates the impact of adding one additional unit into production. It helps in decision-making by providing information about the cost and profitability of producing additional units. However, it is important to consider its limitations and incorporate other factors when making strategic decisions.
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Community Answer
What is marginal costing?a)Assigning standard costs to goods or servic...
Marginal costing, also known as cost-volume-profit analysis, is the calculation of the impact on the cost of a product by adding one additional unit into production. It helps in analyzing the variable costs and volume of production to determine the overall impact on operating profit. Marginal costing is useful for short-term economic decisions, such as determining the profitability of new products or the impact of marketing campaigns.
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What is marginal costing?a)Assigning standard costs to goods or services based on budgeted amountsb)Assessing the difference between standard costs and actual costsc)Calculating the impact of adding one additional unit into productiond)Determining the impact of varying levels of costs and volume on operating profitCorrect answer is option 'C'. Can you explain this answer?
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What is marginal costing?a)Assigning standard costs to goods or services based on budgeted amountsb)Assessing the difference between standard costs and actual costsc)Calculating the impact of adding one additional unit into productiond)Determining the impact of varying levels of costs and volume on operating profitCorrect answer is option 'C'. Can you explain this answer? for B Com 2024 is part of B Com preparation. The Question and answers have been prepared according to the B Com exam syllabus. Information about What is marginal costing?a)Assigning standard costs to goods or services based on budgeted amountsb)Assessing the difference between standard costs and actual costsc)Calculating the impact of adding one additional unit into productiond)Determining the impact of varying levels of costs and volume on operating profitCorrect answer is option 'C'. Can you explain this answer? covers all topics & solutions for B Com 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for What is marginal costing?a)Assigning standard costs to goods or services based on budgeted amountsb)Assessing the difference between standard costs and actual costsc)Calculating the impact of adding one additional unit into productiond)Determining the impact of varying levels of costs and volume on operating profitCorrect answer is option 'C'. Can you explain this answer?.
What is marginal costing?a)Assigning standard costs to goods or services based on budgeted amountsb)Assessing the difference between standard costs and actual costsc)Calculating the impact of adding one additional unit into productiond)Determining the impact of varying levels of costs and volume on operating profitCorrect answer is option 'C'. Can you explain this answer? for B Com 2024 is part of B Com preparation. The Question and answers have been prepared according to the B Com exam syllabus. Information about What is marginal costing?a)Assigning standard costs to goods or services based on budgeted amountsb)Assessing the difference between standard costs and actual costsc)Calculating the impact of adding one additional unit into productiond)Determining the impact of varying levels of costs and volume on operating profitCorrect answer is option 'C'. Can you explain this answer? covers all topics & solutions for B Com 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for What is marginal costing?a)Assigning standard costs to goods or services based on budgeted amountsb)Assessing the difference between standard costs and actual costsc)Calculating the impact of adding one additional unit into productiond)Determining the impact of varying levels of costs and volume on operating profitCorrect answer is option 'C'. Can you explain this answer?.
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What is marginal costing?a)Assigning standard costs to goods or services based on budgeted amountsb)Assessing the difference between standard costs and actual costsc)Calculating the impact of adding one additional unit into productiond)Determining the impact of varying levels of costs and volume on operating profitCorrect answer is option 'C'. Can you explain this answer?, a detailed solution for What is marginal costing?a)Assigning standard costs to goods or services based on budgeted amountsb)Assessing the difference between standard costs and actual costsc)Calculating the impact of adding one additional unit into productiond)Determining the impact of varying levels of costs and volume on operating profitCorrect answer is option 'C'. Can you explain this answer? has been provided alongside types of What is marginal costing?a)Assigning standard costs to goods or services based on budgeted amountsb)Assessing the difference between standard costs and actual costsc)Calculating the impact of adding one additional unit into productiond)Determining the impact of varying levels of costs and volume on operating profitCorrect answer is option 'C'. Can you explain this answer? theory, EduRev gives you an
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