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 |