marginal costing

Marginal Cost

The total cost to a company to produce one more unit of a product. The marginal cost varies according to how many more or fewer units a company wishes to produce. Increasing production may increase or decrease the marginal cost, because the marginal cost includes all costs such as labor, materials, and the cost of infrastructure. For example, if a widget manufacturer increases the number of widgets it produces, it may need to buy more material, but the costs of labor and factory maintenance remain the same, and are spread out over a greater number of widgets. This may reduce the marginal cost. On the other hand, if the manufacturer hires more workers and builds another factory, it will likely increase the marginal cost. It is also known as the incremental cost.

Fig. 55 Marginal costing. A typical example.

marginal costing

a system of product COSTING which assigns variable materials and labour costs to units of product manufactured but which does not assign fixed OVERHEAD costs to products. Fig. 55 shows an illustration of marginal costing.

With marginal costing, work in progress and finished goods stocks are valued at direct materials and direct labour costs only, and fixed overhead costs are charged as a single block against revenues in the period when. they are incurred. By contrast, with ABSORPTION COSTING fixed overhead costs are included in the value of work in progress and finished goods stock.

See CONTRIBUTION, BREAKEVEN.

单词	marginal costing
释义	marginal costing 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 EncyclopediaSeemarginal cost marginal costing Marginal Cost The total cost to a company to produce one more unit of a product. The marginal cost varies according to how many more or fewer units a company wishes to produce. Increasing production may increase or decrease the marginal cost, because the marginal cost includes all costs such as labor, materials, and the cost of infrastructure. For example, if a widget manufacturer increases the number of widgets it produces, it may need to buy more material, but the costs of labor and factory maintenance remain the same, and are spread out over a greater number of widgets. This may reduce the marginal cost. On the other hand, if the manufacturer hires more workers and builds another factory, it will likely increase the marginal cost. It is also known as the incremental cost. Fig. 55 Marginal costing. A typical example. marginal costing a system of product COSTING which assigns variable materials and labour costs to units of product manufactured but which does not assign fixed OVERHEAD costs to products. Fig. 55 shows an illustration of marginal costing. With marginal costing, work in progress and finished goods stocks are valued at direct materials and direct labour costs only, and fixed overhead costs are charged as a single block against revenues in the period when. they are incurred. By contrast, with ABSORPTION COSTING fixed overhead costs are included in the value of work in progress and finished goods stock. See CONTRIBUTION, BREAKEVEN.
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