What is marginal costing and what is its function in rates assessment ?
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Briefly, marginal costing takes into account only those factors which are incurred in using a vehicle to do a particular job such as licences, insurance, interest, fuel, lubricants, tyres, maintenance and depreciation. Any other cost factor such as rent and rates and overheads not directly attributable to the vehicle's operation is omitted. However, it would be imprudent not to add the cost of these " fixed " cost in building a rate, and care should be taken to see that they are included. Marginal costing is useful in assessing the relative profitability of particular vehicles doing specific jobs, and the difference between the revenue earned (rate charged) and the marginal cost is really a contribution to total cost. The difference between contribution and fixed costs is the true profit.