Marginal and Absorption Costing
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Hi All<BR><BR>Having real nightmare getting my head around this for PEV. Does anyone have an easy way of explaining the difference ?<BR><BR>And whats the distinction/difference between standard costs, indirect costs, fixed costs, variable costs, marginal costs ??<BR><BR>:-(
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Marginal and Absorption Costing
Marginal costing says that fixed costs are not related to volume of production but are time based and therefore not included in the unit cost of the product. Absorption costing takes part of the fixed costs into the product costing. The time you will see the difference in the two is when there is closing or opening stock as the valuation for absorption costing will include fixed costs but in marginal costing - it won't.<BR><BR>Standard costs are what the accountant uses as the price that labour or materials should be. It's a measurement.<BR>Indirect costs are costs which can't be directly attributed to the product<BR>Fixed costs are costs which stay the same regardless of output i.e. rent or rates, they are more time based<BR>variable costs are the costs that vary with output i.e. materials<BR>marginal costs are the variable costs added together for a unit i.e. variable labour, variable materials and variable production overheads.<BR><BR>Annette<BR>0 -
Marginal and Absorption Costing
Differences between Absorption and Marginal Costing and how this can affect decision making is a useful area to look at.<BR>I have it on my short list of topics for Dec 05 PEV<BR><BR>Sandy0