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Standard costing: This is the cost of goods sold and the inventory. Standard costing is based on the effective use of both labor and material to produce goods and services in a budgeted total amount. Variance analysis is the difference between the actual and standard costs incurred in operation conditions.
Marginal costing: Also known as cost-volume-profit analysis. This is the effect of the production cost felt when the management decides to add one more unit into production. This cost accounting concept is essential for short-term decisions. It helps the management weigh down the profits of new sales prices, products, and marketing campaigns. It also brings about a break-even point. Break-even-point is the production level where total revenue (T.R.)=Total expenses (T.E.).
Contribution margin is the amount received by subtracting the variable cost of a unit from the sales revenue.
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