Marginal Costing: Variable Cost Accounting

Variable costs are defined as costs that vary with production, that is, they are expected to increase when production increases and to decrease when production decreases. Marginal costs are usually classified as direct materials, direct labour, and other variable costs of production. As a consequence of this, marginal costs should be viewed as avoidable costs […]

Absorption Costing: Full Cost Accounting

Absorption costing adds apportioned overheads or indirect costs to prime costs to arrive at the cost of the product. Absorption costing involves the following three step process: Allocation – is the charging of direct overhead costs to the cost centres or cost units they relate to. Apportionment – there are two types of apportionments, primary […]