28 July 2011
allocating all manufacturing costs to products regardless of whether they are fixed or variable. This approach is known as absorption costing/full costing
However, only variable costs are relevant to decision-making. This is known as marginal costing/variable costing
Absorption costing is costing system which treats all manufacturing costs including both the fixed and variable costs as product costs
Marginal Costing is a costing system which treats only the variable manufacturing costs as product costs. The fixed manufacturing overheads are regarded as period cost
but one more question???? i read some where that in marginal costing cost sheet variance all are apllied in the starting or end of period but in absorption costing we can calculated even in middle months or on management discrection..,but in marginal costing we can calculate at the end or start of year...why this is soo???
CAclubindia
