Marginal costing is a technique that differentiates between fixed and variable costs to determine the effect of changes in output on profits. It classifies costs as fixed or variable, uses variable costs to value inventory, and contribution margin to determine profitability of products and cost centers. Marginal costing can be used for profit forecasting, price determination, decision-making, and profit planning. Its advantages include being simple to use, avoiding overhead absorption issues, and aiding production planning. However, its disadvantages include the segregation of costs and not considering fixed overhead.

1. M.B.A FIRST YEAR
Topic:
Marginal Costing
Presented By:
Rahul Manal
Sarang Sontakke
Sub: AFM Under the guidence of - Ass.Prof Sayali Pitambare

2. Meaning and Definition of Marginal Costing
According to Institute of Cost Management Accountants, London
Marginal Costing can be defined as “The ascertainment of variable
costs and of the effects on profit of changes in volume or type of
output by differentiating between fixed costs and variable costs”

3. Features of Marginal Costing
• Analysing and Presenting
• Classification
• Determining the Profitability
• Variable cost is used for valuing closing stock
• Contribution margin is used for determining the profitablity of
products and cost centers
• Variable component of the total cost is considered to be the marginal
cost of the product.

4. Learning Objectives of Marginal Costing
• To know the meaning of marginal cost
• To understand the various elements of marginal costing technique.
• To appreciate the importance of marginal costing as a decision
making tool
• To realise the advantages and disadvantages of marginal costing.
• To apply marginal costing technique under appropriate situations.

5. Applications of Marginal Costing
Profit Forcasting
Price Determination
Facilitates Decision- Making
Profit Planning

6. Advantages of Marginal Costing
Simple to use and understand
Avoids under Absorption of Overhead
Aids in Production Planning
No over- valuation of stocks
Facilitates Calcultion
Helps to Management
Compare Relative Profitability
Aids Budgetary control and Standard Costing

7. Disadvantages of Marginal Costing
 Segregation of Cost
 No cognizance of fixed overhead
 Unrealistic Assumptions
 Not designed for Contract Costing
 Apportionment of fixed cost