marginal costing

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A costing and decision-making technique that charges only the marginal costs to the cost units and treats the fixed costs as a lump sum to be deducted from the total contribution, in obtaining the profit or loss for the period. In some cases, inventory valuation is also at marginal cost, although this approach does not conform to Statement of Standard Accounting Practice 9 and is used for internal reporting purposes only. Compare absorption costing.

Subjects: Financial Institutions and Services — Accounting.

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