The Meaning and Definition of Differential Cost. (Cost Accounting)
Differential cost is the aggregate of change in fixed cost and variable cost which takes place due to the adoption of alternative course of action or change in the volume of out put.
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These costs do not find place in accounting records. Differential cost is only calculated for decision making. For example: If the work is done in machine the cost is Rs. 2,55,000/- if the work is done with the labor the cost will be Rs. 2,00,000/- the differential cost is Rs. 55,000.