chapter  11
25 Pages

SHORT-TERM DECISION-MAKING

Marginal costing is a widely used technique in the sport industry due to its being relatively simple to understand and easy to apply. Decision-making normally involves a choice between alternatives and will relate to a future period. As a manager you will be expected to make decisions that will affect future performance on a regular basis and you need a technique that will help you appraise projects quickly and will enable you to choose the most profitable path. Marginal costing recognises that costs behave differently as activity changes, so in this chapter we will examine how to construct a marginal costing statement (a tool that you can use to make a quick decision), calculate contribution, and identify the breakeven point in both units and sales (I will explain these terms later).