COSTING

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santhosh

santhosh (Querist)
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22 August 2010 what is the meaning of marginal costing?give examples

CA Ravi Sisodia

CA Ravi Sisodia (Expert)
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22 August 2010 Decision making approach in which marginal costs are used as the basis for choosing which product to make or which process to use. Also called incremental costing.

CA Ravi Sisodia

CA Ravi Sisodia (Expert)
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22 August 2010 Marginal Cost ---

The total cost to a company to produce one more unit of a product. The marginal cost varies according to how many more or fewer units a company wishes to produce. Increasing production may increase or decrease the marginal cost, because the marginal cost includes all costs such as labor, materials, and the cost of infrastructure. For example, if a widget manufacturer increases the number of widgets it produces, it may need to buy more material, but the costs of labor and factory maintenance remain the same, and are spread out over a greater number of widgets. This may reduce the marginal cost. On the other hand, if the manufacturer hires more workers and builds another factory, it will likely increase the marginal cost. It is also known as the incremental cost.

CA Ravi Sisodia

CA Ravi Sisodia (Expert)
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22 August 2010 The additional cost needed to produce or purchase one more unit of a good or service. For example, if a firm can produce 150 units of a product at a total cost of Rs.5,000 and 151 units for Rs.5,100, the marginal cost of the 151st unit is Rs.100. Industries with sharply declining marginal costs tend to be made up of firms that engage in price wars to gain market share. For example, the airlines often discount fares to fill empty seats with customers from competing airlines. Also called incremental cost.

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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22 August 2010 In simple words Marginal cost is nothing but the variable cost of the product. In the decision making process it will play great role

Ex: Material, Labour

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