Marginal Costing Formula


Marginal Costing equation, profit volume ratio, Break even point, Margin of safety,cost break even point,finding  the selling price, finding the profit,.

                                Marginal Costing
1Marginal Costing EquationSales – VC = FC + Profit
2ContributionSales – VC
Profit + FC
3Profit Volume RatioContribution / Sales
(In Marginal Costing,
Profit = Contribution)Change in Profit / Change in Sales
(Profit = EBIT)Change in Contribution / Change in Sales
100% – VC Ratio (PV % + VC % = 100% of Sales)
4Break Even PointTotal Revenue = Total Cost
Break Even Point(In Rupees)FC / PV Ratio
Break Even Point(In Rupees)Break Even Point * Selling Price
Break Even Point(Quantity)FC / Contribution p.u
Note:At BEP, Total Contribution = Total Fixed Cost
5Margin Of SafetyTotal Sales – Break even Sales
Margin Of Safety(In Rupees)Profit / PV Ratio
Margin Of Safety(Quantity)Profit / Contribution p.u
6Indifference Point / Cost Break Even PointTotal Sales = Total Profits
(In Rupees)Difference in FC / Difference in VCR
(In Rupees)Difference in FC / Difference in PVR
(In Quantity)Difference in FC / Difference in VC p.u
(In Quantity)Difference in FC / Difference in Contribution p.u
7Shut Down Point
(In Rupees)Avoidable FC / PV Ratio
(In Quantity)Avoidable FC / Contribution p.u
8Avoidable FCTotal FC – Min Unavoidable FC


1ContributionProfit + FC
2Sales(In Rupees)Contribution / PV Ratio
3ProfitContribution – FC
4ContributionSales * PVR
5Finding the Selling PriceTotal VC / VCR
6Finding the ProfitMOS * PVR
Note:Always MOS + PVR = 100%


1VC p.u Remains Same (it Changes if units increased or decreased but not Sale Price)
2FC p.u. Varies but remains fixed in total(FC are the Period Cost hence charged off to P & L A/c in Marginal Costing)
3Point of Indifference
a)Below the POI : Choose the product having lesser FC
b)Above the POI : Choose the product having Higher FC
4BEP% + MOS% = 100% of Sales