Marginal & Absorption Costing Flashcards
Period costs…
Are charged in full to the SOPL in the period they are incurred.
Product costs…
Are charged to the individual product and matched against the sales revenue they generate.
The main difference between Marginal and Absorption costing is the treatment of…
Fixed production costs.
Marginal costing = period cost
Absorption costing = product cost
Total marginal cost…
Is the sum of all the direct and variable costs.
Contribution =
Sales revenue - variable costs.
Profit =
Contribution - fixed costs.
Absorption cost =
Full production cost.
Cost of sales =
Purchases + Opening Inventory - Closing Inventory
Profit margin…
Is a percentage return on sales.
Profit = (Total cost) x (Required Margin)/(1 - Required Margin)
Selling Price = (Total cost) / (1 - Required Margin)
