This is a technique of costing uses the concept `Marginal Cost’. Marginal cost can be defined as the change in the total cost of production as a result of a change in the production by one unit. Thus the marginal cost is nothing but a variable cost. The revenue arising from the excess of sales over variable costs is known as `contribution’. Using contribution as a vital tool, marginal costing helps to a great extent in the managerial decision making process. This unit deals with the various aspects of marginal costing.

Thus marginal cost is the added cost of an extra unit of output.


Institute of Cost and Management Accountants (ICMA), London,

      MC=Direct Material + Direct Labour + Other Variable Costs(or)

Total Cost – Fixed Cost.


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