What is marginal Costing

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Marginal costing is a technique of cost accounting which deals with the ascertainment of marginal cost and its use in decision making.

It is a method of cost accounting that focuses on the variable costs of production.
It helps in determining the contribution margin of a product or service.
It is useful in making short-term decisions such as pricing, make or buy, etc.
It does not take into account fixed costs while calculating the cost of production.
It is also known as variable costing or direct costing.
Example: A company produces a product that has a variable cost of $10 and a selling price of $20. The contribution margin would be $10.
Example: A company is considering whether to accept a special order at a lower price. Marginal costing can help in determining whether the order will be profitable.

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