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Important factors to be considered in marginal costing decisions

Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Rakesh Sahu asked about 3 years ago

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 CA Sandeep Bohra answered almost 3 years ago

n all recommendations of marginal Costing decisions, the following factors are to be considered: Contribution: Whether the product or production line in question makes a contribution. Specific fixed cost, if any: Where a choice is to be made between two course of action, the additional fixed overhead, if any, should be taken into account. CVP relationship: The effect of increase in volume on profits, and the rate of earning, additional profits, should be analysed. Incremental contribution: Where additional quantities can be sold only at reduced prices, incremental contribution will be more effective in decision making, as it takes into account the additional sale quantity and additional contribution per unit. Capacity: Whether acceptance of the incremental order, or additional product line is within the firm’s capacity or whether key factor comes into play, should be analysed. Non cost factors: Non cost factors should also be considered, wherever applicabl

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Data?1494421730 rohit awasthi answered about 3 years ago

Dear Friend > Important factors to be considered in marginal costing decisions In all recommendations of marginal Costing decisions, the following factors are to be considered: 1. Contribution: Whether the product or production line in question makes a contribution. 2. Specific fixed cost, if any: Where a choice is to be made between two course of action, the additional fixed overhead, if any, should be taken into account. 3. CVP relationship: The effect of increase in volume on profits, and the rate of earning, additional profits, should be analysed. 4. Incremental contribution: Where additional quantities can be sold only at reduced prices, incremental contribution will be more effective in decision making, as it takes into account the additional sale quantity and additional contribution per unit. 5. Capacity: Whether acceptance of the incremental order, or additional product line is within the firm’s capacity or whether key factor comes into play, should be analysed. 6. Non cost factors: Non cost factors should also be considered, wherever applicable. Thanks

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