Management Accounting
Management Accounting Checklist
Example of marginal costing
Example of marginal costing:
Marginal costing clearly demonstrates the break-even-point (BEP). In this case the business needs to produce a contribution of £20,000 to fully cover the fixed costs and 'break-even'. Alternatively a management accountant might prepare costs on a fully absorbed basis and allocate the £20,000 of fixed costs to the products. One method of absorption costing is the fully integrated standard costing system which is used in manufacturing companies. This method of costing uses standard costs, material usage, labour rates and times for product costing and produces reports that show variances for each of these categories that enable management to take corrective action or amend plans. Another method is Activity Based Costing (ABC) whereby costs are first assigned to activities and then to products.
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