marginal costing

marginal costing

1. Learning objectives

3. 123 _ Facts about Marginal Costing

11. 12.5 Advantages and Limitations of Marginal Co:

13. ‚Cost-Volume-Profit Analysis

15. Algebraic Calculations

17. Mustation 4 (Treatment of commission in computing sales price and ealeulaton of
Break Even Point)

A Chinese soft dink company is plaming to estan a subsidiary company in nda to
produce mineral water. Based on e estimated annun sales of 40000 bots of te mine
Water, cos sudes produced te follwing esmate forthe Indian subsidiary:

Matera 7210000
Labour 150000

Factory O 92000

émisraton Expenses 20000
The Indian producton wil be sold by manufacturer rpresentatves who wil eee a

‘of 8% of he sal pce. No prion ofthe Japenese offce expense i o be
‘atocated to te nin subdary. You are requred lo

(0 Computs te ak rc per bote 1 enable the management tree an estimated 10%
Profi an ale proceed nia

(1), Cakulte te break-even pon in Rupee sees as aso n number of bots or he naan

futsidary on e assumption thatthe sale pice 214 per tl

Answer
Working Notes (segregation of Cost)

Solution

18. CT

21. ‘etal Over(Und)
Budget

24. 12.9 Margin of Safety

and other formulae

25. Hustation 13 (Application of marginal cost equation)

An automobile manufacturing company produces dfeent modes of Cars
respect of model 07 fr ie month of Merc, 2013 as under

Budgeted Output
Net Reaksaton

Varabk Costs

Meeris

Labour

Drect expenses

Speal Fine Costs
len Fed Cats

Teta Coste

The budget in

4,000 Unts

Tho es

20280
64250

26. E
70000

akute:

(Prof win 10 percent herease In s
volume

(8), Votame to be achieved © maintain the org
costs, al the orignaly budgeted seing pee per unt

newer

ing pice with 10 percent reducin in sae

al prof aer 10 percent ise in mat

32. Hustation 21 (Implication of changes in diferent variables on PIV ato)

By noing “IV wil inrease ar IV wl decrease or P/V wi not change’ as he case may e,
how te flowing independent stueions wi afecte PV rt

() Anineeasen e physeal als vote,

(a) Acecrease i the variable cost per unit

(19 A decrease in the contain magn;

(Y) An increase in sting prie per unt

(MM Acerease i the fed ces

{ui A 10% increase in bot sling pice and variable cos per un,

(ut A 10% increase inte sling pic per unt and 10% deerease Inthe physical sab
vohme

(i) A 8036inease in the variable cos per u and 0% decrease in the Med cost

(9 An increase inthe angle ol inience

Anewer

33. 12.12 Graphical Representation of Break Even Chart

35. KA

39. 42.43 The Limitations of Breakeven Analysis

12.14 Summary