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ID number:839631
 
Evaluation:
Published: 09.01.2004.
Language: English
Level: Secondary school
Literature: n/a
References: Not used
Extract

The cost of a product under marginal costing or variable costing includes only the variable costs of making the product. The variable costs include direct material, direct labour and variable overheads. Variable costs per unit approximate the marginal cost of making another unit of a product. Selling price minus variable costs adds up to contribution. Contribution is the amount of money available to cover the fixed costs and afterwards to contribute to profit. The fixed costs are treated as period costs and are expensed in the period incurred.

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