This will be different using marginal costing, since the finished goods inventory will be valued at a lower cost per unit because of the absence of absorbed production overheads (see panel 12).
There are strong arguments that marginal costing can be a more appropriate method for performance measurement and decision-making.
Marginal costing does not carry forward fixed production costs from one period to another, whereas absorption costing does carry forward fixed production overheads.
It can be concluded that the marginal costing approach has greater profit sensitivity.
25) Improving the cost transparency of indirect activity areas through Marginal Costing requires a thorough understanding of the output processes.
29) Marginal Costing and its tools have been developed for individual companies and are the suitable platform for this expansion.
4 RELATIONSHIP OF MARGINAL COSTING TO RIEBEL'S DIRECT COSTING AND CONTRIBUTION MARGIN ACCOUNTING
The dispute that raged in the 1960s and 1970s between the proponents of Marginal Costing on the one hand and Riebel's Direct Costing and Contribution Margin Accounting on the other has since been settled.
5 RELATIONSHIP BETWEEN MARGINAL COSTING AND PROCESS COSTING/ABC
Marginal Costing is based on the use of resource drivers for cost planning, cost control and analysis, and cost assignment.
As it turned out, marginal costing was a totally different kettle of fish, and transplanting the arguments from the United States into Germany would prove less successful when measured against initial U.
As is evident from Chapter Zero, the clash between marginal costing and the new thinkers resulted in vigorous debate and active research in Germany that will serve as a sound foundation going forward.
To highlight progress and point to aspects that still need to be settled in the current transformation process, Chapter Zero identifies a number of areas where marginal costing and the new concepts are at odds with each other as well as areas where they are considered complementary (see Section 0.
3) as well as leveraging the structures and information of marginal costing for value-based management and the balanced scorecard (Section 0.
Areas where marginal costing and the new concepts are at odds tend to be more fundamental and center on ABC's proposed shifts in the principles to be applied.