Marginal costing is an important technique of management accounting used by managers for planning, controlling operations and making short-term business decisions. It is based on the classification of costs into fixed costs and variable costs. Under marginal costing, only variable costs are treated as the cost of production, while fixed costs are considered period costs and are charged against the contribution earned during the period. The difference between sales revenue and variable cost is known as contribution. Contribution first covers fixed costs and then contributes to profit. This approach provides useful information to management because many managerial decisions depend on how costs and revenues will change when the level of activity changes. One of the most important applications of marginal costing is decision making relating to the level of production and sales. Management can determine how changes in sales volume will affect contribution, fixed costs and profit. The contribution per unit is calculated as selling price per unit minus variable cost per unit. If the contribution per unit is known, managers can estimate the additional profit resulting from an increase in sales, provided that fixed costs remain unchanged. This makes marginal costing particularly useful for evaluating different production and sales alternatives. Marginal costing is also widely used for break-even analysis. The break-even point is the level of sales at which total contribution is equal to total fixed costs and there is neither profit nor loss. The break-even point can be expressed in units as fixed costs divided by contribution per unit. Management can use this information to determine the minimum level of sales required to avoid losses. It also helps managers assess the margin