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The use of job costing as a tool for the pricing and cost control decisions in the printing industry: the case of Société de Presse et d'Editions (SOPECAM)

par Christian Kuiate Sobngwi
University of Buea - Bachelor of Science 2003

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Also referred to as marginal costing, or in some other texts as direct costing; variable costing as stated by Coulthurst (2001) is a costing technique which places more emphasis on the behavioural characteristics of the costs unlike absorption costing which focuses on the functional nature of the those costs. The aim in variable costing is generally to separate the costs into fixed and variable elements.

Copeland, Dasher et al (1995)17(*) defines variable costing as a form of cost accumulation in which only the variable costs are accumulated with inventory as it is being manufactured. Under variable costing, fixed overhead costs are not accumulated with the inventory being manufactured; instead they are regarded as period expenses. As shown in the above definition, unlike absorption costing which assigns both fixed and variable costs to the cost units, variable costing treats fixed costs as period costs and they are therefore not included in the unit cost calculations.

The preparation of a profit statement using marginal costing can be done using the following format:

Sales *******

Less: costs

Opening stocks ****

Variable Production costs Direct materials costs ****

Direct labour costs ****

Direct expenses ****

Indirect expenses ****

Less closing stocks ****

Add Non-manufacturing variable costs *****

Cost of goods sold *****

Contribution ******

Fixed manufacturing costs *****

Fixed non-manufacturing costs ******


Net profit ********

Source : Drury (1992) p184

Marginal costing also has its proponents who claim that:

a) It is simple to operate

b) No apportionment, which are frequently on an arbitrary basis of fixed costs to products or departments. Many fixed costs are invisible by their nature.

c) Where sales are constant, but production fluctuates, marginal costing shows a constant net profit whereas absorption costing shows variable amounts of profits.

d) Under or over absorption of overheads is almost entirely avoided; the usual reason fro under or over absorption is the inclusion of fixed costs into overhead absorption rates and the level of activity being different to that planned.

e) Fixed costs are incurred on a time-basis and do not relate to activity, therefore, it is logical to write them off in the period they are incurred; this is done using marginal costing.

f) Accounts prepared using marginal costing more nearly approach the actual cash flow position.

Using a particular costing technique will mainly depend on the use that will be made of the output information. This cost information may be used for external reporting, internal decision-making or future planning.

Costing techniques do not replace the costing methods; they are always used together in order to have a complete costing system.

This paragraph ends our discussion on cost concepts. This study is not only aimed at studying the cost structure of SOPECAM, it is also designed to help management in the process of pricing their products. As such we need to have an insight into the pricing theory based on cost information and this will be the topic of the next paragraphs.

* 17 Copeland, R.M., Dascher, P.E., Strawser, J.R., Strawser, R.H., (1995): Managerial Accounting (5th edition), Dame Publications Inc., Houston

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