Management Accounting: Marginal Costing vs Absorption Costing

Management Accounting

TABLE OF CONTENT
• INTRODUCTION
• MARGINAL COSTING
• ABSORPTIONAL COSTING
• ADVICE TO GSQ Limited
• CONCLUSION
• REFERENCES

Introduction
• Management accounting is the concept of analysis and reporting income and
expenditures which an organization earns and expends while operating in
business environment.
• For this purpose, a company is selected which is GSQ Limited.
• In this presentation, an analysis of marginal and absorption costing is
conducted in order to advising GSQ about budgeting approach to follow.

Marginal Costing
Marginal costing is a technique of costing under which only variable cost of is
charged to the unit of cost and the fixed cost for that period is written off
completely against the contribution.
Income Statement under Marginal Costing
Sales ( £30*50000 ) 1,500,000
Less: Variable Cost of Production
Direct Materials ( £8*50000 ) 400,000
Direct Labour ( £9*50000*20/60 ) 150,000
Manufacturing O/H ( £2*50000 ) 100,000
650,000
850,000
Less: Variable Selling Cost
Variable Sales O/H ( £4*50000 ) 200000 200000
Contribution : 650,000
Less: Fixed Production Costs 160,000
Less: Fixed Selling Costs 60000