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Flashcards in Costing Definitions Deck (4):

Marginal Costing

A technique that focuses on variable costs and contribution to fixed costs and profits.
It is primarily used for short term decision making. (One off orders).


Absorption Costing

Focuses on overheads and full cost recovery through the apportionment of overheads to production cost centres on some equitable basis, and the calculation of OAR for cost units.


Activity Based Costing (ABC)

A development of absorption costing and focuses on overheads and full cost recovery.
Arguably more accurate as it focuses on cost drivers and avoids splitting overheads between cost centres.


Standard Costing

Based on budgeted costs / revenues that should be achievable assuming reasonable levels of efficiency.
It compares actual results with budgeted figures to identify efficiency related variances.