MARGINAL COST PRESENTATION (INNOVATION-THE BUSINESS SCHOOL).pptx

THIS IS SPECIALLY FOR FINANCE STUDENT.

1. MARGINAL COSTING PRESENTED BY -: LIZA LAXMIDHAR KALYANI LOPA GHANTIDABA

2. CONTENT MARGINAL COSTING PROFIT VOLUME RATIO BREAK EVEN POINT MARGIN OF SAFETY

3. MARGINAL COSTING Marginal costing Refers to a additional cost added by increasing the quantity. Marginal costing is method of costing which is used to ascertain the marginal cost.

4. FORMULA OF MARGINAL EQUATION :- Sales – Variable cost = Fixed cost + Profit Sales –variable cost = Fixed cost – Loss Sales = Fixed cost+ Variable cost +Profit Sales = Fixed cost+ Variable cost –Loss Sales – Variable cost = Contribution Fixed cost + Profit = Contribution Fixed cost – Loss = Contribution

5. PROFIT VOLUME RATIO :- Profit Volume ratio is the relationship between profit and sales volume. FORMULA OF P/V RATIO:- P/V Ratio = Contribution / sales Contribution = Fixed cost + profit = Fixed expenses + Profit/Sales OR Sales – Variable cost = Sales – Variable cost/ Sales P/V RATIO = Change in profit or Contribution/Change in Sale

6. BREAK-EVEN POINT :- Break even point is the point when there is no profit and no loss . At this point total sale = total cost FORMULA OF BREAK EVEN POINT:- BEP(UNITS)=Total fixed expenses/ Selling Price per unit – variable cost Per unit BEP = T otal fixed expenses / Contribution per unit BEP (IN Rupees) = Fixed expenses/P/V Ratio

7. PROBLEM:- From the following particulars calculate contribution ,P/V ratio , break even point in units an in rupees - Fixed expenses=1,50,000 Variable cost per unit = Rs.10 Selling price per unit = Rs.15 SOLUTIONS :- Contribution = Sales – Variable Cost =15-10 = Rs 5. P/V Ratio = Contribution/ Change in sales *100 =5/15*100 =0.33*100 = 33 1/3% (Ans) Break even point (units) = Total fixed expenses/Contribution = 150000/5 = 30,000 (Ans) BEP(in rupees) = 150000/0.33 = 4,50,000 (Ans)