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Marginal Costing Part 1 Ques
What is marginal cost in the context of costing?
Marginal cost is the additional cost incurred in producing one extra unit of output, comprising only variable costs such as direct materials, direct labour, and variable overheads.
What is the formula for calculating contribution in marginal costing?
Contribution equals selling price minus variable cost per unit.
How does marginal costing differ from absorption costing?
Marginal costing charges only variable costs to products and treats fixed costs as period costs written off in full, whereas absorption costing absorbs both fixed and variable overheads into product costs.
What does a higher P/V ratio indicate about a product's profitability?
Higher P/V ratio indicates greater profitability and faster profit earning.
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