pathfinder - The Institute of Chartered Accountants of Nigeria

PATHFINDERIn Marginal Costing on the other hand,- Fixed costs are not absorbed into production. They are treated as operatingexpenses- Stocks are valued at prime cost plus variable overheads at the end of the period- Marginal cost of sales is deducted from sales revenue to arrive at the contribution.(c)Uses of Marginal Costing:-(i)(ii)(iii)(iv)Used as a basis for providing information to the management forplanning and decision-making.It is appropriate for short run decisions involving changes in the volumeor activity and the resulting cost changes.It is used for flexible budgetingIt is used for transfer pricingEXAMINERS‟ REPORTThe question tests candidates‟ understanding of the differences and similarities inMarginal Costing and Absorption Costing.About 60% of the candidates attempted the question. Performance was fairly good.About half of the candidates scored 50% and above. Common pitfalls by candidatesinclude:Difficulty in computing closing stock either for marginal costing or absorption costing;Wrong treatment of stock figure in the accounts;Arithmetic was poor; andLack of understanding of the two topics.Candidates are advised to:work harder by attempting to solve past questions;improve on their presentation; anduse the right texts including the Study Packs.INTERMEDIATE EXAMINATION - NOVEMBER 201131