First, approach. Absorption costing is a system that

First, marginal and absorption costing can create
organizational success. Both costing techniques are significantly different.
Drury (1992) defined marginal costing which a system uses variable
manufacturing costs as product costs which are the direct expense, direct
labour, direct material and variable overhead. Lucey (2002) also said that
marginal costing is also called as direct costing and contribution approach.
Absorption costing is a system that uses all the fixed manufacturing overheads
costs such as variable and fixed costs as product costs. Absorption costing is
also called as full costing (Jawahar and Seema 2009).

Furthermore, according to Lucey
(2002), the company obtains useful information from the two approaches for
planning and decision making. Cost changes of the company caused by varying in
amount or activity which relating short-run decisions especially. The company
can ensure activity level of sales and production is within the corresponding
scope to achieve a maximum profit. Moreover, the company also obtains profit or
contribution information from marginal costing. It can evaluate whether the
company is making profit or loss at certain levels of sales and also able to
expect profits by the size of the contribution. As Vivek Shriram Mahajan (2014)
stated that before the company make a decision on whether a decrease or
increase production, the company has to determine the effect of reducing off
current price on net profit. In contribution margin or gross profit margin of
products, they give preference to company determines which product is higher
contribution margin.

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In addition, Bhavesh (1997) also
stated that the management evaluates the most profitable product mix that
helping by marginal costing. Therefore, the company can make a better
comparison of profitability of different goods and activities. Marginal costing
technique is used for inventory valuation to assist the company when reporting
a higher profit in some situations. As (2017)
states that marginal costing causes net operating income is always close to
cash flow. With this, cash flows problem might be solved. Thus, internal
management uses it as a significant tool to make a decision. Debarshi (2011)
also mentioned that the useful information of pricing the products provided to
the management of the company. The decision on pricing the products is able to
be taken by the management easily if there is unchanged of variable cost per
unit during periods within a short time. 
For a company to be successful, it ought to run the business which
minimises marginal cost and increases volume and selling price of products to
enhance the profit level of the business (Traver 2015).  In short, Rajasekaran and Lalitha (2011) stated
that the marginal costing technique acts an important part to create
organization success.

Besides that, the absorption
costing also provides information that usually has used for purposes of profit
reporting and financial accounting. It encourages the company to manufacture
products by using absorb overheads to fulfil market demands. Moreover, the
company also can be easier to evaluate products’ profitability and price with
fixed overheads and prevent under or over absorption or any losses in business.
Absorption costing is needed for income tax reporting and external financial
reporting. In addition, it also draws a picture of the profitability of company
which important to future benefits such as improve production and sales
(Maverick 2015).

Moreover, as a result of proper
allocation and apportionment of fixed factory overheads, the managers become
more liable for the costs and services that provided to their centres or
departments. James (2013) mentioned that a whole picture of product’s cost
which consists of fixed manufacturing overhead costs is provided by absorption
costing technique. This is because there is included all the probable costs
which provide a more true or accurate view of the importance of products from
an economic standpoint to the company. Therefore, marginal and absorption
costing is especially suitable for short-run decisions which involve the
changes in quantity or activity and cause the changes in cost. The company has
to apply and understand them to operate the business effectively. Successful
can be close to any company. However, the company will get the same total
profit through those two management accounting techniques in long run.