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Flashcards in Decision And Control Deck (3)
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Under marginal costing how is contribution calculated

Selling price less variable costs


What are the advantages of marginal costing, and there fore disadvantages of absorption costing

Simpler no under or over absorption
Suitable for short term decision making
Treats fixed costs as they behave
Profit is influenced by sales not production


What are the disadvantages of marginal costing

Does not comply with IAS2 can’t use in year end statements
Fixed costs should not be ignored in the long term
All costs have to be split between fixed and variable