- The Marginal costing technique is appropriate for decision making as it highlights those costs (and revenues) which will change as a result of the decision under review being put into effect.
- As fixed costs are mostly overheads, and, under marginal costing these are all treated as period costs and charged into the income statement therefore marginal costing avoids arbitrary allocation of overheads to units of output.
- Reporting profit on a marginal costing basis will be more closely relates to changes in sales volume and are less affected by changes in inventory levels.
- An understanding of the behavior of costs and the implications of contribution is vital for accountants and managers as the use of marginal costing for decision making is universal.
Arguments in favor of Marginal Costing (Advantages)
