Monday, 18 November 2019

Unit 12: Decisions Involving Alternative Choices


                                  Unit 12: Decisions Involving Alternative Choices   

Marginal costing technique helps in determining the most profi table relationship between costs, prices and volume of business.

Following are the important areas of decision-making or applications of marginal costing:   Fixation of Price,   Decision to Make or Buy,   Selection of a Profi table Product Mix,   Decision to Accept a Bulk Order,   Closure of a Department or Discontinuing a Product,   Maintaining a Desired Level of Profi t, and   Evaluation of Performance     Decision-making: Decision-making describes the process by which a course of action is selected as the way to deal with a specifi c problem.

Desired Profi t: It is a profi t level desired by the fi rm to earn at the given level of sales volume.

Fixed Cost: It is a cost which is fi xed or remains the same for irrespective level of production.

Key Factor: Factor of infl uence on the component of contribution.

Marginal Cost: Change occurred in the cost of operations due to change in the level of production.

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