The purpose of this study was to examine the impact on profit margins by the choice of costing method. The study was conducted in collaboration with a company where four salesmen shared their spreadsheets with calculations on several different articles with the corporate management’s approval. After studying the spreadsheets, interviews with the four salesmen were held for further processing of the empirical data. After some processing, complementary questions were asked to the respondents and corporate management and thereafter calculations were made according to the full costing, variable costing, and Activity-Based Costing methods. The study’s calculations are post-calculations where all costs and overhead surcharges are based on historical costs from the fiscal year 2021. Finally, when the calculations of the profit margins were computed, the profit margins generated from the different methods applied on the different articles, was compared with each other. 

The result of the study showed that the choice of costing method does have significant impact on the profit margin and the interpretation of it. One conclusion that could be drawn was that the full costing method generates a lower profit margin than all the other costing methods that this study has examined. The reason for this was found to be that the full costing method allocates all costs within the company distributed on the different articles which makes historical costs an important part of the calculations. Hence, it should be mentioned that this costing method is suitable on the long term since indirect costs are taken into consideration due to the continuous updates that the overhead surcharges undergo every year. That contributes to an annual update for the basis of the surcharges. In contrast to the Activity-Based Costing method that yielded higher profit margins than the full costing method for example, it should be said that that this fact is due to how much of the indirect costs that is allocated to the specific article. One conclusion that is in parity with previous research of the Activity-Based Costing method, is that the method is time consuming where the choice of activities and their cost drivers, has a crucial role for the method’s reliability. 

The study also showed that the variable costing method, when implemented on all the examined articles, yielded a higher profit margin than all the other costing methods this study has examined. On short terms it is likely that the calculated profit margins reflect reality in trustworthy ways, on longer terms however, it is unlikely that the profit margins will remain so high. This is due to the before mentioned cost allocations that is applied in a lower scale for the variable costing method since incremental costs is opposed to incremental revenues.