Differential Cost
I.C.M.A
defines differential cost as “the increase or decrease in total cost or the
changes in a specific element of cost that result from any variations in
operations: with reference to level of output
Differential Costing
According to
I.C.M.A London “Differential Costing is a technique based on repartation of
adhoc information in which only cost and income difference between two
alternatives/courses of action are taken into consideration”.The differential
cost analysis is useful in making many policy decisions such as:
The
introduction of a new plant.
Make or buy
decisions
The
profitability of a change in product mix
Acceptance
of an offer at a lower selling price
Change in
the methods of production.
Submitting
Tenders
The
determination of price at which raw materials can be purchased.
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