Acta Universitatis Danubius. Œconomica, Vol 10, No 3 (2014)

Abstract

This paper will investigate the controversy that is innate between the two costing techniques; Absorption Costing and Marginal Costing and would throw light on which costing technique better serves its purpose in helping management for decision making process and if Marginal Costing technique is concluded as better technique then why it should not be used for external reporting purpose. This paper will only crystallize and highlight the issues descriptively and will not resolve the issues that are inherent between the two costing techniques. The unique thing about this paper is that it is in favor of treating fixed cost as product cost that is it is supporting the advocates of Absorption Costing Technique but it is against to consider profit as a function of production rather it believes that profit should only be considered as function of sales for stock valuation and to help management in decision making process that is, regarding this point it is supporting advocates of Marginal Costing.