Define marginal cost how is it different from absorption costing
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In marginal costing, marginal cost is determined by bifurcating fixed cost and variable cost. Only variable costs are charged to operation, whereas the fixed cost are excluded from it and are charged to profit and loss account for the period.
Converselty, Absorption costing or otherwise known as full costing, is a costing technique in which all costs, whether fixed or variable are absorbed by the total units produced. It is aminly used for reporting purposes, i.e. for financial and tax reporting. There are many who say marginal costing is better, while others prefer absorption costing. So, one should know the difference between marginal costing and absorption costing to reach at conclusion, as to which one to be preferred over the other.
Converselty, Absorption costing or otherwise known as full costing, is a costing technique in which all costs, whether fixed or variable are absorbed by the total units produced. It is aminly used for reporting purposes, i.e. for financial and tax reporting. There are many who say marginal costing is better, while others prefer absorption costing. So, one should know the difference between marginal costing and absorption costing to reach at conclusion, as to which one to be preferred over the other.
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