marginal costing


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marginal costing

n
(Accounting & Book-keeping) a method of cost accounting and decision making used for internal reporting in which only marginal costs are charged to cost units and fixed costs are treated as a lump sum. Compare absorption costing
References in periodicals archive ?
Now we will follow the same basic worked example as before, but this time using marginal costing. Again, we will be preparing the budget for the months of January to April inclusive, but we will also have to process some data from before and after these months.
But the monetary values of these inventories will be different because, under marginal costing, the product cost includes variable production costs only.
This book, (1) on the current state of standard costing, focuses on the methodology of Marginal Costing. Marginal Costing (1B) is a type of flexible standard costing that separates fixed costs from proportional costs in relation to the output quantity of the objects.
For this reason, we first need to look at how Marginal Costing is currently integrated into management accounting.
These new rules retain many of the familiar attributes of the FSC, such as determination of profits on a transactional basis, marginal costing principles, foreign economic process requirements (FEP) and safe-haven administrative pricing rules.
As a result, we need to keep in mind the impact of marginal costing when finding suppliers and service providers.
Marginal costing ignores cash flows that won't be affected by a proposal, since they are deemed irrelevant, but this can take a naive view of prepaid sunk costs or future committed costs when applied to short-term decisions, since firms must cover all their costs in the medium to long term to make a profit.
Although marginal costing can be more safely applied to "one-off" orders, even these can have a sting in the tail.
Although the textbook discusses the development of standard costing in Germany over the years, its primary focus is the most advanced form, which goes under various names: standard costing, flexible standard costing, marginal costing, contribution margin accounting, the latter two terms combined, and Grenzplankostenrechnung (generally abbreviated in U.S.
Flexible Plankostenrechnung und Deckungsbeitragsrechnung literally translates into "Flexible Plan Cost Accounting and Contribution Margin Accounting." In this article, I will use the term marginal costing, which is a literal translation of the predominant term used in the German text.
In Caterpillar's case, the redetermination of the FSC benefit also included marginal costing, which is a way to increase foreign profit margins based on product groupings.
Additionally, taxpayers are permitted to apply the CTI method (or the FTGR limitation on the CTI method) using "marginal costing," which permits the export profit to be computed without considering indirect costs (i.e., deducting only direct materials and direct labor costs).