3.10 Marginal costing


Additional information

Categorisation of costs by behaviour and understanding of terms.

Costs and terms are:

  • direct costs
  • indirect costs
  • variable costs
  • semi-variable costs
  • fixed costs
  • stepped costs
  • marginal cost
  • contribution (total and per unit)
  • break-even.

Calculation and interpretation of break-even point, interpreting break-even charts and the uses and limitations of break-even analysis methods.

Break-even analysis methods are break-even calculations and break-even charts.

The use of marginal costing in decision making situations.

Decision making will involve the use of marginal costing techniques and consideration of non-financial factors.

Decision making situations are:

  • make or buy
  • acceptance of additional work
  • price setting
  • optimum use of scarce resources
  • closing of potentially loss-making line or production department
  • target profit.