Marginal Costing is based on the use of resource drivers for cost planning, cost control and analysis, and cost assignment.
In this sense, then, the relationship between Marginal Costing and Process Costing/ABC as cost allocation models is not only one of competition but also complementary.
Compared with extending the application of cost assignment to support activities using resource drivers as in Marginal Costing, which is achieved mainly by moving away from the use of purely time-based allocation bases, (63) a closer look at the use of Process Costing/ABC tools reveals additional methodological differences.
In Process Costing/ABC, the processes are essentially an additional level between cost center accounting and job order cost accounting in Marginal Costing. The German version of Process Costing/ABC as defined by P.
The identification of cost drivers is not bound to the rigors of sophisticated driver-based accounting (such as Marginal Costing), and process/activity cost drivers remain problematic because the cost drivers of the main processes are not the same as the measures of the subprocesses (e.g., different allocation levels, such as the number of purchase orders for the main process Order Material).
In conclusion, we have seen that process costing and Marginal Costing are fully complementary approaches to cost management.
An empirical study in Germany found that Marginal Costing is used by 49% of small companies, 65% of mid-sized companies, and 61% of large companies and that 42% of all companies use marginal costs in short-term operational accounting.
The concept of benefit-based costs has found widespread acceptance, and not only in Marginal Costing. (3) It must be kept in mind, however, that this concept is only needed for highly specialized cost accounting purposes.
Consistent with the reporting system of Marginal Costing, this practice can be justified by the time scale used in cost planning and particularly cost differentiation.
Institutional-economic considerations transcend the conventional Marginal Costing principles of transfer prices.