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


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%


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


1 Comment

Leave a Reply

Your email address will not be published. Required fields are marked *