Ashima Negi is teaching live on Unacademy Plus
18:51 NTA UGC NET 2019 By:- Assistant Professor(Ms.)Ashima Negi Candidate For Doctorate ( Ph.D.) UGC NET-Management. CA(I), MBA Finance, BBA, PGDM-Materials Management, NCFM, TQM & ISO 9000, Qs 9000 & Assurance, CCIBL
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18:51 4G LTE Contents . Marginal Costing . Standard Costing Variance Analysis Financial Management . Capital Structure . Leverages . Ratio Analysis Zero Based Budgeting
18:51 Features of Marginal Costing . The main features of marginal costing are as follows: (a) All costs are categorized into fixed and variable costs. Variable cost per unit is same at any evel of activity. Fixed costs remain constant in total regardless of changes in volume . (b) Fixed costs are considered period costs and are not included in product cost, only variable costs are considered as product costs. . (c) Stock of work-in-progress and finished goods are valued at marginal cost of production. . (d) In marginal process costing, products are transferred from one process to another are valued at marginal costs only . (e) Prices are determined with reference to marginal cost and contribution margin (f) Profitability of departments, products etc. is determined with reference to their contribution margin. (g) In accounting, marginal cost, the overhead control account in the cost ledger represents only the variable overhead. Fixed costs are taken as expenses in the profit and loss account and thus excluded from costs. . (h) Presentation of data is oriented to highlight the total contribution and contribution from each product. (i) The difference in the magnitude of opening stock and closing stock does not affect the unit cost of production since all the product costs are variable costs.
18:51 Absorption Costing and Marginal Costing In absorption costing, stock is valued at total cost while in marginal costing stock valuation is done at variable cost only. This means that in absorption costing, stock valuation is higher than in marginal costing. When production exceeds sales, profit under absorption costing is higher than that of marginal costing. But when sales exceed production, profit under absorption costing is lower than that of marginal costing. Absorption costing is a principle whereby fixed, as well as, variable costs are allotted to cost units and total overheads are absorbed according to activity level. Absorption costing confirms with the accrual concept by matching costs with revenue for a particular accounting period. Stock valuation complies with the accounting standard and fixed production costs are absorbed into stocks. . Absorption costing method avoids separation of costs into fixed and variable elements, which is not easily and accurately achieved. Cost plus pricing under absorption costing ensures that all costs are covered.