A Study on Marginal Costing in Godrej Consumer Product Ltd

Introduction The costs that vary with a decision should only be included in decision analysis. The marginal cost of a product – “is its variable cost”. This is normally taken to be; direct labor, direct material, direct expenses and the variable part of overheads. It is the technique of presenting cost data wherein variable costs and fixed costs are shown separately for managerial decision-making. It is simply a method or technique of the analysis of cost information for the guidance of management which tries to find out an effect on profit due to changes in the volume of output. These are different phrases being used for this technique of costing. Marginal costing technique has given birth to very useful concept of contribution where contribution is given by: Sales revenue less variable cost (marginal cost). Contribution may be defined as the profit before the recovery of fixed costs. Thus, contribution goes toward the recovery of fixed cost and profit, & is equal to fixed cost + profit (C = F + P).