AccountingCode 9706
Marginal costing
What this topic asks you to be able to do
- how to work out a product's contribution
- how to read and make sense of a break-even chart
- how to work out the break-even point, the contribution to sales ratio, how much must be produced or sold to reach a target profit, and the margin of safety
- what break-even analysis is put to use for, and its limitations
- how to use marginal costing to draw up statements of cost and profit
- how to compile a statement that reconciles reported profit under marginal costing with reported profit under absorption costing
- what marginal costing can be used for, and its limitations
- how helpful marginal costing data is in supporting decision-making by managers, including make-or-buy, special orders, closure of business unit, limiting factors, target profit
- non-financial factors and the significance they carry