What is the difference between absorption costing and marginal costing in concept and use
Answers
Explanation:
BASIS FOR COMPARISON MARGINAL COSTING ABSORPTION COSTING
Meaning A decision making technique for ascertaining the total cost of production is known as Marginal Costing. Apportionment of total costs to the cost center in order to determine the total cost of production is known as Absorption Costing.
Cost Recognition The variable cost is considered as product cost while fixed cost is considered as period costs. Both fixed and variable cost is considered as product cost.
Classification of Overheads Fixed and Variable Production, Administration and Selling & Distribution
Profitability Profitability is measured by Profit Volume Ratio. Due to the inclusion of fixed cost, profitability gets affected.
Cost per unit Variances in the opening and closing stock does not influence the cost per unit of output. Variances in the opening and closing stock affects the cost per unit.
Highlights Contribution per unit Net Profit per unit
Cost data Presented to outline total contribution of each product. Presented in conventional way.