Mostly, marginal costing is used for decision-making process. But the decision maker should keep in mind following drawbacks/ disadvantages of marginal costing:
It focuses on contribution margin to decide the profitability of the product. However, fixed cost may be quite high which may cause the profitability into a severe loss,
In short term if fixed cost is too high, it would be unclear for the management to decide just over the basis of contribution margin, the use of marginal costing and absorption costing simultaneously may create confusion for the managers to take decision and may overload the work of the staff.
