Marginal costing Theory

State two assumptions of marginal costing

1. It is assumed that in marginal costing fixed costs stays the same although most costs are step fixed and are only fixed within a relevant range

2. Variable costs are assumed to be variable at all levels of output however however variable costs may decrease due to economies of size

3. it is assumed that mixed costs are easy to seperate in Hi low however this is not the case

4. It is assumed that the selling price per unit is constant and does not include a discount

Direct cost

A direct cost is a cost that can be directly linked to an object

Sensitivity Analysis

investigation of what happens to NPV when only one variable is changed

Difference between financial and management accounting

- Financial accounting is mandatory by law

- CMA is optional by the company

- Financial accounting has strict guidelines and regulations

- Cma can be done anyways management wants

- Financial accounts are prepared for external viewers

- CMA is for the managers