The differences between full and contribution costing

1. Full costing takes into account all costs associated with producing a product or service, while contribution costing only considers variable costs.
2. Full costing includes fixed costs such as rent and salaries, while contribution costing does not.
3. Full costing provides a more accurate picture of the true cost of producing a product or service, while contribution costing is simpler and easier to calculate.
4. Full costing is often used for financial reporting purposes, while contribution costing is more commonly used for internal decision-making.
5. Full costing can result in higher prices for products or services, while contribution costing can lead to lower prices and higher sales volume.
6. Full costing can help identify areas where cost reductions can be made, while contribution costing may not provide as much insight into cost structure.
7. Full costing can be more complex to calculate and may require more detailed record-keeping, while contribution costing is more straightforward.
8. Full costing can help businesses determine their break-even point, while contribution costing may not provide as much information on profitability.
9. Full costing can be useful for businesses with high fixed costs, while contribution costing may be more appropriate for businesses with low fixed costs.
10. Ultimately, the choice between full and contribution costing depends on the specific needs and goals of the business.