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    Marginal Costing: Shikha Sharma

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    deepakarora201188
    Marginal costing is a technique that involves identifying and measuring variable costs and fixed costs. It helps calculate marginal cost, break-even point, margin of safety, and cost-volume-profit analysis. The document provides an example to illustrate marginal cost, which is the change in total cost from producing one additional unit. It then explains how to calculate break-even point using a break-even graph. The break-even point is the level of output where total revenue equals total cost, meaning there is no profit or loss. Finally, the document demonstrates calculating profit volume ratio, which is the percentage of sales needed to cover variable costs and contribute to profits. Marginal costing is useful for profit planning,

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    Marginal Costing: Shikha Sharma

    Uploaded by

    deepakarora201188
    141 views13 pages
    Marginal costing is a technique that involves identifying and measuring variable costs and fixed costs. It helps calculate marginal cost, break-even point, margin of safety, and cost-volume-profit analysis. The document provides an example to illustrate marginal cost, which is the change in total cost from producing one additional unit. It then explains how to calculate break-even point using a break-even graph. The break-even point is the level of output where total revenue equals total cost, meaning there is no profit or loss. Finally, the document demonstrates calculating profit volume ratio, which is the percentage of sales needed to cover variable costs and contribute to profits. Marginal costing is useful for profit planning,

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    Marginal Costing

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    Marginal costing is a technique that involves identifying and measuring variable costs and fixed costs. It helps calculate marginal cost, break-even point, margin of safety, and cost-volume-profit analysis. The document provides an example to illustrate marginal cost, which is the change in total cost from producing one additional unit. It then explains how to calculate break-even point using a break-even graph. The break-even point is the level of output where total revenue equals total cost, meaning there is no profit or loss. Finally, the document demonstrates calculating profit volume ratio, which is the percentage of sales needed to cover variable costs and contribute to profits. Marginal costing is useful for profit planning,

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    141 views13 pages

    Marginal Costing: Shikha Sharma

    Uploaded by

    deepakarora201188
    Marginal costing is a technique that involves identifying and measuring variable costs and fixed costs. It helps calculate marginal cost, break-even point, margin of safety, and cost-volume-profit analysis. The document provides an example to illustrate marginal cost, which is the change in total cost from producing one additional unit. It then explains how to calculate break-even point using a break-even graph. The break-even point is the level of output where total revenue equals total cost, meaning there is no profit or loss. Finally, the document demonstrates calculating profit volume ratio, which is the percentage of sales needed to cover variable costs and contribute to profits. Marginal costing is useful for profit planning,

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    Marginal Costing

    BY
    Shikha sharma
    Marginal Costing
    Meaning of Marginal cost – Marginal cost means that increase of
    total cost witch happens by increased or decreased by one unit in
    the production volume.
    Example –
    Unit Total cost Rs. Marginal cost Rs.
    0 500 (Fixed cost) -
    1 800 300
    2 1100 600
    3 1400 900
    Marginal costing is a variable cost.
     Break even point (no Profit no loss)
     Cost volume profit (c/s x 100)
     Marginal of Safety (S-BEP)
    Break Even Point -
     lefoPNsn fcUnq js[kk fp= ds ek/;e ls fdl lhek
    rd oLrqvksa dk mRiknu vFkok foØ; djuk
    gkfuizn gS rFkk fdl fcUnq ds i’pkr ykHk izn
    gksxkA lkFk gh fdruh oLrqvksa dh fcØh ij
    fdruk ykHk gkfu jgsxhA ;g ckr lefoPNsn
    fcUnq ds vkxs & ihNs okyh fLFkfr ls Kkr gks
    tkrh gSA vr,o ;g js[kk fp= O;kolkf;;ksa ds fy,
    mi;ksfxrkiw.k gS %&
    Example –
    Product (in units) - 2000 4000 6000 8000 1000
    0

    Fixed Costs (in Rs.) 2000 2000 2000 2000 2000

    Variable Costs (50 paise per unit) 1000 2000 3000 4000 5000

    Sales Price (Rs. 1 per Unit) 2000 4000 6000 8000 1000
    0
    y
    10000

    Profit
    8000

    6000
    ales
    S
    Variable
    Break Even Point l C osts Cost
    a
    Tot
    4000
    Marginal of Safety
    Sales and costs (Rs.)

    2000
    Fixed
    Cost

    o 2000 4000 6000 8000 10000 x


    Output in Units
    Break Even Point Graph
    Break Even Point : - FxS 2000 x 4000
    =
    S-V 4000 - 2000

    BEP = 4000

    Break Even Point is a No Profit No Loss


    That is : Fixed Cost = 2000 Variable Cost = 2000
    Total Cost = 2000+2000 = 4000
    Total Sales = 4000
    Profit & Loss = 4000 – 4000 = 0
    bl izdkj ;fn ge 10000 Units dh fcØh dks vk/kkj ekudj fuEu
    dh x.kuk djrs gSA
    fn;k x;k gS & Product in Unit = 10000
    Fixed Cost (Rs.) = 2000
    Variable Cost = 5000
    (50 Paise Pur Units)
    Sales = 10000

    Kkr djuk gS & (1) BEP =


    FxS
    =
    2000 x 10000

    S-V 10000 - 5000


    BEP = 4000

    (1) Margin of Safety :-


    Total Sales - BEP
    10000 - 4000 = 6000

    lqj{kk lhek ftruh vf/kd gksxh mruh gh vPNh gSA


    (3) Profit Volume Ratio -
    Profit Volume Ratio or P/V Ratio og
    nj gS ftlesa ek=k dh c<+ksRrjh
    ds lkFk ykHk c<+rk gSA ykHk ek=k vuqikr ] ek=k esa
    ifjorZu gksus ds Qy Lo:i ykHkksa esa tks ifjorZu gksrk gS
    mls Kkr djus dh dqath gSA
    S-V
    Formula :- P/V Ratio = X 100
    S
    10000 - 5000
    P/V Ratio = X 100 = 50 %
    10000
    Example
    ;fn ges 10000 :- ykHk dekuk gks rks fcØh fdruh djuh
    gksxhA
    Fixed Cost = 2000
    Profit Desired = 10000
    P/V Ratio = 50%

    Formula -
    F + Pd
    Sales in Rs. =
    P/V Ratio

    2000 + 10000
    Sales in Rs. = = 24000
    50 %

    10]000 :- bfPNr ykHk dekus ds fy, gesa 24000 :- dh fcØh djuk


    gksxkA
    Advantage of Marginal Costing :-
    (1) Easy To understand.
    (2) Helpful in Profit Planning.
    (3) Helpful in cost control.
    (4) Helpful in Decision Making : -
    (a) Make or Buy Decision
    (b) Capturing the foreign Markets.
    (c) Change of Product Mix
    (d) Pricing – (I) Sales Price in Normal Condition
    (II) Determination of Minimum Price
    (III) Determination of Price below the
    Total cost.
    (IV) Temporary closure of production.
    (V) Permanent closure of the factory
    THANKS

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