engleski

Importance of Marginal Costing for Management Decision and Control

Management uses information from past transactions as an aid for decision-making and control for future. Numerous costing methods have been developed for these purposes. Most of them are based on the costing records from which the information about the accurate costs of individual products and services, together with the total costs of running the business may be obtained. Marginal costing, as alternative costing method, splits costs into fixed and variable components. Contribution analysis is essential regarding to marginal costing. By using marginal costing the evaluation of decisions and control based on contribution will enable the management to determine the situation that would maximise profit when there is a limiting factor. The management will have to work out which sort of product gives the maximum contribution per unit of the scarce resource, as this would in turn maximise profit.

fixed costs; variable costs; contribution; control; decision making

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