Marginal costing aids decision-making by focusing on variable costs

Steps:

• Identify marginal costing as a method that separates variable costs (relevant for decisions) from fixed costs.
• Evaluate each option against key benefits of marginal costing, such as supporting techniques like break-even analysis.
• Confirm B aligns with how marginal data highlights contribution margins for choices like make-or-buy.
• Rule out others as they misrepresent standards, pricing, or core principles.

Why B is correct:

• Marginal costing classifies costs into fixed and variable, enabling decision tools like CVP analysis via contribution margin = sales - variable costs.

Why the others are wrong:

• A: International standards (IAS 2) require absorption costing for inventory valuation, not marginal.
• C: Marginal costing emphasizes variable costs for pricing, ignoring fixed costs, which complicates full consideration.
• D: The fixed-variable distinction is fundamental to marginal costing for relevance in short-term decisions.

Final answer: B