Marginal Costing Definition

Marginal Costing Definition:

Marginal Costing is a costing method that includes only variable manufacturing costs–direct materials, direct labor, and variable manufacturing overhead–in unit product cost. Marginal costing is also called variable costing and direct costing.

Marginal cost of the product = Direct materials cost + Direct labor cost + Variable manufacturing overhead cost

Marginal Cost Method (Function and pricing)

  • Increase or decrease in total cost of production
  • Fixed costs cant be changed so only variable costs are Accounted.
  • In companies where average costs are consistent. Managerial costs are are equal to Average costs

Learn More About Marginal Or Variable Costing System:

  • What is marginal/variable/direct costing?
  • What is the purpose of using marginal costing system?
  • What are its advantages and disadvantages?
  • How does marginal costing system differs from absorption costing system?

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