Definitions:

In order to appreciate the concept of marginal costing, it is necessary to
study the definition of marginal costing and certain other terms associated with this
technique. The important terms have been defined as follows:
1. Marginal costing : The ascertainment of marginal cost and of the effect on profit of
changes in volume or type of output by differentiating between fixed costs and variable
costs.
2. Marginal cost: The amount at any given volume of output by which aggregate variable
costs are changed if the volume of output is increased by one unit. In practice this ismeasured by the total variable cost attributable to one unit. Marginal cost can precisely be
the sum of prime cost and variable overhead.