Marginal Costing Principles

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What type of costs are excluded from costs and taken as expenses in the Profit and Loss Account?

Fixed costs

In marginal costing, how are products transferred from one process to another valued?

At marginal costs only

What is the basis for determining prices in the context of marginal costing?

Marginal cost and contribution margin

How is the profitability of departments, products, etc., determined in marginal costing?

With reference to their contribution margin

How does the difference in the magnitude of opening stock and closing stock affect unit cost according to the text?

It does not affect unit cost as all product costs are variable costs.

What is the definition of 'marginal cost'?

The amount by which aggregate costs change with a one unit increase or decrease in output volume

In marginal costing, how are variable costs treated?

Charged to cost units and written off against contribution

What is the basis of categorizing costs in marginal costing?

By their behavior with changes in volume of output

Why are fixed costs not included in product cost in marginal costing?

Because fixed costs are considered as period costs

What is another name for marginal costing?

'Variable Costing'

Learn about the concept of marginal cost and how it is applied in costing. Understand how variable costs and fixed costs are treated in marginal costing.

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