Marginal costing is regarded as the key tool to make well-informed decisions in a manufacturing sector. It can benefit the management as follows:
- It calculates contribution margin at each level of activity, so there is no room for creating unreal profit by producing unnecessary extra units,
- It is good for short-term decision making as the quick impact of increase in sales units can be seen in the increase of the variable cost,
- It helps the strategic management to make divisional manager responsible for the performance of the division,
- Profit can only be improved by controlling the cost.