Which method of costing is the correct one, either absorption costing or marginal costing? Which method arrives at the correct profit?
Which one is used in industrial practices??
2 Replies
CA SURENDRA KUMAR RAKHECHA
(Practising CA at Surat)
(26263 Points)
Replied 04 May 2010
Absorption costing is used in industrial practices.
At normal efficiency level standards costs are decided to control the costs.
To control the costs means; if at the end of the budget period the organisation finds that per unit cost is somewhat different than what was targeted, then they will find out the reasons thereof. With the help of different variances of standard costing; they will be in a position to see in which areas costs have increased. After identifying the increased areas; they again will focus on the costs why these have increased. After finding the reasons; they will take remedial actions so that costs will remain in control.
Marginal costing is used for decision making only. In general circumstances; with the help of marginal costing an organization would be in a position to see where costs are equal to revenue (break even point). Marginal costing is specially useful where spare production capacity is there.
Recent Topics
- TDS on purchase of Flat under subvention scheme be
- Nznxnc call me at the end of the day of the
- Nsje snswk fjw ed le ene djff ne enje ejdd rejje
- Hxjcif the day I have been in touch with me and
- Iska djd djrbdsjebshe sir ur rei ejr reinr the jr
- GST registration for medical shop in Karnataka
- Hsshs me know if you are free number of the
- Chu Kang and the situation of the situation and I
- How to reverse wrong transaction payment in phonep
- Paytm wrong transaction
Related Threads
CAclubindia
