ECONOMICS

Detailed explanation-1: -Marginal costing is useful in profit planning; it is helpful to determine profitability at different level of production and sale. It is useful in decision making about fixation of selling price, export decision and make or buy decision. Break even analysis and P/V ratio are useful techniques of marginal costing.

Detailed explanation-2: -Marginal costing is a very valuable decision-making technique. It helps management to set prices, compare alternative production methods, set production activity levels, close production lines and choose which of a range of potential products to manufacture.

Detailed explanation-3: -Marginal costing definition: Marginal Costing is a decision-making technique for determining the total cost of production. In marginal costing, variable cost is treated as product cost, and fixed cost is treated as period cost. And, this type of costing is also known as variable costing.

Detailed explanation-4: -Relevant cost is a managerial accounting term that describes avoidable costs that are incurred only when making specific business decisions. The concept of relevant cost is used to eliminate unnecessary data that could complicate the decision-making process.

Detailed explanation-5: -Facilitates cost control – By separating the fixed and variable costs, marginal costing provides an excellent means of controlling costs. 3. Avoids arbitrary apportionment of overheads – Marginal costing avoids the complexities of allocation and apportionment of fixed overheads which is really arbitrary.