There are a number of decision making situations such as pricing on special orders, optimal sales mix, adding/removing product mix products, etc. where marginal/variable cost is taken into consideration. The author has taken the initiative to identify two managerial decision-making situations in which marginal/variable costing is most appropriate. 1.1 Make or buy decisions: An organization often must decide whether to manufacture a component or purchase it from third parties; in this case, marginal/variable costing is the most appropriate approach to help the manager decide what to do. Here, the relevant cost is the incremental cost between the two options. This situation is explained below with an example of a fictitious organization supported by Khan MY & Jain P. K (1993). (Please refer to Appendix 5 to connect the facts and figures from the analysis below) ABC Response and Discussion