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Finance, Taxation and All Statutory Information For Everyone

Accounts Knowledge Hub

Finance, Taxation and All Statutory Information For Everyone

Costing

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
1 Marginal Costing Equation Sales – VC = FC + Profit
2 Contribution Sales – VC
Profit + FC
3 Profit Volume Ratio Contribution / 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)
4 Break Even Point Total 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
5 Margin Of Safety Total Sales – Break even Sales
Margin Of Safety(In Rupees) Profit / PV Ratio
Margin Of Safety(Quantity) Profit / Contribution p.u
6 Indifference Point / Cost Break Even Point Total 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
7 Shut Down Point
(In Rupees) Avoidable FC / PV Ratio
(In Quantity) Avoidable FC / Contribution p.u
8 Avoidable FC Total FC – Min Unavoidable FC

OTHERS

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

NOTES

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