Presentation of Information:

In absorption costing the classification of expenses is
based on functional basis whereas in marginal costing it is based on the nature of
expenses. In absorption costing, the fixed expenses are distributed over products on
absorption costing basis, that is, based on a pre-determined level of output. Since fixed
expenses are constant, such a method of recovery will lead to over or under-recovery of
expenses depending on the actual output being greater or lesser than the estimate used
for recovery. This difficulty will not arise in marginal costing because the contribution is
used as a fund for meeting fixed expenses.