Question

What do you mean by marginal cost in cost accounting?

Answer 1

Marginal cost is the cost of one additional unit of output. The concept is used to determine the optimum production quantity for a company, where it costs the least amount to produce additional units. If a company operates within this "sweet spot," it canmaximize its profits.

Answer 2

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• Marginal costing system is very useful for internal purposes – decision making, planning and control.

• Calculation of cost of sales, under marginal costing system, is very simple to understand.

• Marginal costing system is very simple to operate as it does not require complex apportionments of overheads.