Lesson Plan

• Describe the components of full (absorption) costing and contribution (marginal) costing.
• Compare how each approach treats fixed and variable costs and the resulting impact on profit measurement.
• Apply both costing methods to a numerical example to calculate unit cost, contribution margin and profit.
• Analyse which costing method is appropriate for different managerial decisions and external reporting requirements.

• Projector or interactive whiteboard
• Printed worksheet with the numerical example
• Calculator for each student
• Costing comparison handout (summary table)
• Whiteboard markers and flip chart

Begin with a quick poll: “When you buy a product, what costs do you think are included in its price?” Connect this to prior knowledge of fixed vs. variable costs, then outline that today students will master two costing approaches and be able to decide which to use in real‑world scenarios.

1. Do‑now (5'): Students answer the poll question on sticky notes; teacher groups responses.
2. Mini‑lecture – Full Costing (10'): Explain allocation of all manufacturing costs, show formula and sample table.
3. Guided practice – Full Costing calculation (10'): Work through the provided numerical example together.
4. Mini‑lecture – Contribution Costing (5'): Highlight variable‑only allocation and contribution margin concept.
5. Paired activity – Contribution Costing (10'): Students complete the contribution‑costing side of the worksheet.
6. Whole‑class discussion (5'): Compare results, discuss advantages/disadvantages and appropriate usage.
7. Exit ticket (5'): Write one sentence stating when you would choose full costing over contribution costing.

Summarise the key differences in cost allocation, profit measurement and decision‑making focus. Collect exit tickets to gauge understanding, then assign homework: complete a short case study where students recommend the appropriate costing method for a given business scenario.