Cost accounting

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Vipin Nair

Vipin Nair (Querist)
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12 December 2013 What is the difference between "Marginal Costing" and "Absorption Costing"?

CA Vijeta Verma

CA Vijeta Verma (Expert)
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14 December 2013 See,in marginal costing "Fixed cost" are shown as a periodical cost whereas in absorption costing "recovered fixed cost is shown"depending upon the recovery rate on each product.
Next,In marginal costing major deciding factor is contribution whereas in absorption costing we consider profits.
In marginal cost ,we show closing stock at its varioable cost whereas in absorption costing it is shown at total cost(complete recovery).
While absorption costing is a traditional method of cost computation ,marginal costing is modern costing approach ,more reliable for decision making situations.As it considers fixed cost as a sunk cost ,which it true as well.

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