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 |
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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 | ||
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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) | |||
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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 |

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