Assumptions of Marginal Costing:
1. All Elements of cost can be segregated into fixed and variable cost.
2. Variable cost remains constant per unit of output irrespective of the level of output and thus fluctuates directly in proportion to changes in the volume of output.
3. The selling price remains unchanged at all levels of activity.
4. Fixed costs remain unchanged for entire volume of production.
5. The volume of production is the only factor which influences the costs.
6. The state of technology process of production and quality of output will remain unchanged.
7. There will be no significant change in the level of opening and closing inventory.
8. The company manufactures a single product. In the case of a multi-product company, the sales-mix remains unchanged.
9. Both revenue and cost functions are linear over the range of activity under considerations.