CMA

Comprehensive study of cma covering fundamental concepts and advanced applications.

Introduction to Cost and Management AccountingElements of CostCosting Methods
Budgeting and Budgetary ControlStandard Costing and Variance AnalysisMarginal and Absorption Costing
Preparing a Cost SheetDecision Making Using Marginal CostingPractical Variance Analysis
Time Management for CMA ExamsEffective Revision TechniquesHandling Exam Stress
Introduction to Cost...Elements of CostCosting MethodsBudgeting and Budget...Standard Costing and...Marginal and Absorpt...Preparing a Cost She...Decision Making Usin...Practical Variance A...Time Management for ...Effective Revision T...Handling Exam Stress
Practical Applications

Decision Making Using Marginal Costing

Using Marginal Costing for Better Choices

Marginal costing helps managers make key decisions such as pricing, accepting special orders, or choosing between alternatives.

Common Scenarios

  • Accepting or rejecting a special order below the usual price.
  • Deciding whether to discontinue a product line.
  • Choosing between different production methods.

Real-World Application

If a factory has unused capacity, accepting a special order at a price above marginal cost increases profit—even if it’s below normal selling price.

Making the Call

The decision should consider only the additional (marginal) costs and revenues.

Marginal Costing in Daily Business

This approach ensures resources are used efficiently and profitably.

Examples

  • A toy company accepts a large holiday order because it covers marginal costs and adds to profit.

  • A bike manufacturer discontinues a slow-selling model after analyzing marginal cost data.

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Practical Variance Analysis