The advantages of marginal costing are as follows:
● Easy to operate and simple to understand.
● Marginal costing is useful in profit planning; it is helpful to determine profitability at different level of production and sale.
● It is useful in decision making about fixation of selling price, export decision and make or buy decision.
● Break even analysis and P/V ratio are useful techniques of marginal costing.
● Evaluation of different departments is possible through marginal costing.
● By avoiding arbitrary allocation of fixed cost, it provides control over variable cost.
● Fixed overhead recovery rate is easy.
● Under marginal costing, valuation of inventory done at marginal cost. Therefore, it is not possible to carry forward illogical fixed overheads from one accounting period to the next period.
● Since fixed cost is not controllable in short period, it helps to concentrate in control over variable cost.
