Direct costing

[faisal_desperado]

Irfan , Direct Costing, also called as marginal/variable costing is a cost accounting method under which only variable cost of production( Which is directly related to the volume of production)is treated as a cost of goods sold and fixed manufacturing cost( Fixed cost is that cost which is incurred regardless of volume of production) is ignored, the resultant figure ( Sales - Variable Cost) indicates Contribution margin.
The purpose of applying this method is to ascertain the Break Even point, decision making when there are some limiting factors, selection of a most profitable product among multiple products etc.

Best Regards,