Marginal costs and full costs

Marginal costs are costs incurred by the production of a unit of measure of a product.

Example

For the production of an article, fixed costs of €100 are incurred, costs for the provision of machines or rent for a production site.

This is referred to as fixed costs.

For material and resources there are flexible costs of 5€ per manufactured unit. One unit costs 105 €, two units 110 €. For each unit produced, the total cost increases by 5 EUR. This amount corresponds to the marginal costs.

 
Note: Setup time is part of Marginal costs.
 

Fixed costs are e.g. Overhead costs (accounting, electricity, water), Rent for production hall.

Set-up times, for example, are not fixed costs, but part of the production process.

In the Resource Master Data > Cost Details tab you can define the Marginal and Fix costs and can calculate the Full cost.

Full costs are all costs incurred in a period that are allocated to a service directly or indirectly via a cost center, as far as possible according to the source.

In contrast to direct costs, full costs include all costs that are are created within the framework of the operational provision of services.

In contrast to partial costs, effective costs include all costs that are actually incurred in the production of business activities. Whether and in which cases full costs are to be used is primarily a problem of costing. (Full cost principle, full cost calculation).

Speaking of full costs means that the entire costs of a period are settled up to the cost units of the enterprise. They represent the resulting unit costs. This means that the total unit costs for all cost objects produced or deducted in a period are the same as the total costs of the company. A similar distribution of all costs is carried out in the systems of full cost accounting.