Accounting Essay Example | Topics and Well Written Essays - 1000 words - 16

Accounting - Essay ExampleFirst, at that place ar numerous advantages of using bare(a) costing over absorption costing. It is easier to carry out the control and goal of production costs. This is through the management avoiding the arbitrary allocation of the fixed knock costs thus having an feat and maintenance of a uniform and marginal cost that is consistent (BANERJEE, 2006).Second, marginal costing helps in supply for short-term profit. This is through the easy demonstrations using the break-even charts and profit graphs. Unlike the absorption costing, comparative profitability posterior easily be assessed and hence be brought to the notice of the management so that there is decision make (Avis, 2009).Third, with the implementation of marginal costing, there is ready appreciation and assessment of the effects of the production policies and alternative sales. This ensures that there will be maximum yield to the business due to the decisions arrived. This gives it a notch higher than in using absorption costing (V., 2010).The method eliminates any large balances that are left in the overhead control accounts. This thus indicates that there is a difficulty in ascertaining the accurate recovery rate of overheads. With the elimination, it becomes easier to check up on the accurate overhead rate of recovery (Drury, 2007).On the other hand, there are the disadvantages of using marginal costing over the absorption costing technique. First, there is difficulty in separating costs into the fixed and inconstant costs. This is because, in the long run, all costs are variable. Such classification may sometimes occupy to misleading results to the cyber firm (Hill, 2012).Second, under the marginal costing, stocks and the work in progress are usually understated. The forcing out of fixed costs, especially from the inventory, affects the profit. With this, the true and fair view of the