ABSORPTION COSTING VS MARGINAL COSTING

1) Both fixed and variable cost are

considered for product costing and
inventory valuation.
1) Only variable cost is considered
for product costing and inventory
valuation.
2) The fixed cost is charged to cost of
production. Each product is to bear a
reasonable share of fixed cost and
profitability of product is thus
influenced by subjective
apportionment of fixed cost.
2) Treatment of fixed overhead is
different.
Fixed cost is considered as a period
cost. And profitability of different
product is judged by P/V ratio.
3) Presentation of cost is on
conventional pattern. Net profit of
each product is determined after
deducting fixed overheads.
3) Production of data is oriented to
highlight the total contribution and
contribution from each product.
4) The difference in the magnitude of
opening stock and closing stock
affects the unit cost of production
due to the impact of related fixed
overheads.
4) The difference in the magnitude of
opening stock and closing stock does
not affect the unit cost of production.






Distinction Between Standard Costing And Budgetary
Control
Although budgetary control and standard costing both are based on some common principles; both are pre-
determined, comparison will be made with the actual costs and both system need a revision of the
standards or the budget, these two systems have certain differences which are as follows:

1. Budgetary control deals with the operation of a department or the business as a whole in terms of
revenue and expenditure. Standard costing is a system of costing which makes a comparison between
standard costs of each product or service with its actual cost.

2. Budgetary control covers as a whole in terms of revenue and expenditures such as purchases, sales,
production, finance etc. Standard costing is related to a product and its cost only.

3. Budgetary control is applicable to utmost all business organizations. Standard costing is applicable to
manufacturing concerns producing standard products and services.

4. Budgetary control is concerned with a specific period and is based on the totals of amounts. Standard
costing is concerned with the standard costs, which are worked out generally per unit of production.

5. Budgetary control is not based on standard costing system. Standard costing cannot exist in the
absence of a budgetary control system.