Critical Analysis

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Critical Analysis

Critical Analysis

1.Marginal Costing

Marginal costing can be defined as the cost that differentiates between the variable cost and the marginal cost. For example in case of a product's marginal cost, it is considered as a variable cost. The costs that are included are as of direct material, direct labor, and the direct expenses. Also the over head's variable part is included (Debarshi, p.19).

However, formally we can define the marginal costing as a system of accounting where variable cost is applied in the unit cost and the fixed cost of a particular time period, and are write off in wholesome against the aggregate contribution. Operational reports can be developed for all segments of the company, with separate costs into fixed and variable, and clearly showing the nature of any variation. The responsibility for costs and variations can then more easily be attributed to individuals and specific functions, from top management down (Crosson, S. and Powers p.1079).

2.Uses of marginal costing

According to company 's production technology, management and personnel conditions, the cost for each project is to develop a marginal cost. Variability in the distinction between manufacturing cost and permanence of the manufacturing costs, the need to develop flexibility in the budget under the standard cost.

The cost difference between marginal cost and the cost of production constitutes the actual product.

And cost accounting related materials , cost of production , finished goods and cost of sales account can be credited directly to the Marginal cost, simplified processing accounts.

Marginal cost of the development and analysis process is the various departments within the enterprise management level inspection process, the process of employee motivation and incentive corporate performance evaluation process. Costing , cost management and cost control to achieve the organic combination.

Marginal method should be based on production characteristics ...
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