22.8. Marginal Costing: Meaning

Try these first

1. 1.

   Define marginal cost in your own words.

   Hint

   Think about costs tied to increasing production.

2. 2.

   What is the contribution margin?

   Hint

   How do we calculate profit generated by each unit?

3. 3.

   What is marginal costing?

   • A method that includes fixed costs in product costing
   • A method that charges only variable costs to products
   • None of the above

   Hint

   Recall how marginal costing differs from traditional costing methods.

4. 4.

   The contribution margin is defined as __________.

   Hint

   Think of it as the profit generated from each unit sold.

5. 5.

   ABC manufacturer has fixed costs of ₹120,000, variable costs of ₹250 per unit, and each unit is sold for ₹400. If the company produces and sells 600 units, calculate total contribution, fixed cost coverage, and profit.

   Hint

   Focus on breaking down each calculation step by step.

6. 6.

   XYZ tech firm is evaluating a new product line. Explain how marginal costing can aid them in making decisions on pricing and product mix when considering new software development.

   Hint

   Think in terms of decision-making benefits!