It is a technique, which presents us with information enabling us to consider the profitability of an undertaking by considering the behaviour of costs. Marginal costing depends on:
Cost identification and separation
Calculation of contribution
Identification and separation
We need to be able to separate our costs into the various elements as described above. Our variable costs are also referred to as marginal costs, which can be defined as "every expense (whether of production, selling or distribution) incurred by the taking of a particular decision"