Standard, marginal and absorption costing 2 / 3

The difference between standard, marginal and absorption costing

Standard costing systems can be either an absorption costing system or a marginal costing system.

These differ in much the same way that ordinary absorption costing and marginal costing systems differ.

  • Marginal costing systems focus on contribution: in a standard costing system, there is a standard contribution per unit, equal to the difference between the standard selling price and the standard variable cost.

  • Absorption costing systems focus on profit per unit, and the standard profit per unit of product is the difference between its standard sales price and standard full cost.