Difference Between Marginal Costing and Absorption Costing:
1. Concept of Profit: Under absorption costing, net profit is arrived at by deducting administration, selling and distribution expenses from gross profit. But Under marginal costing, net profit is arrived at by deducting fixed expenses from contribution.
2. Chargeability: Under Marginal Costing, only marginal cost is charged to products. But under Absorption Costing, both fixed and variable cost is charged to the cost of products.
3. Valuation of Stock: Stock is valued at variable costs under Marginal cost. But under Absorption costing stocks are valued at total costs.
4. Absorption of Fixed Expenses: In Marginal Costing, Fixed cost is wholly charged against contribution. But in Absorption costing, Fixed costs are absorbed on the basis of volume of output.
