COSTS USED IN DECISION MAKING

1 . MARGINAL COST
• According to CAS-1, Marginal cost is the aggregate of variable cost i.e.,
prime cost plus variable overheads.
• It is based on the distinction between fixed and variable costs.
• Marginal Cost is used in Marginal Costing System.
2. DIFFERENTIAL COST
• According to CAS-1 by ICWA, The change in costs due to change in the level of activity is
known as differential costs.
• The algebraic difference between the relevant cost at two levels of activities is the
differential cost.
• If the change increases the cost, it will be called incremental cost. If there is decrease in
cost resulting from decrease in output, the difference is known as decremental cost.