Marginal Costing PPt

PRESENTATION ON MARGINAL COSTING To be presen presented ted by: Muniram Prasad Sharma Roll no: 14/09 2nd Semester

Introduction Margin Marg inal al Co Cost stin ing g is the ascertain inm men entt of marginal costs and the effect on profit of changes in volume or output by differentiating between fixed and variab var iable le cos costs ts.. It is a costing technique of where only variable cost will be charged to the cost of unit produced.

Marginal Costing Concept of Profit Contribution is the difference between the sale value and the marginal cost of sales. Contribution can be represented as: Contribution= Selling Price  Marginal Cost 

Fixed xed Exp Expens enses es +/- Pro Profit fit/Lo /Loss ss Or, Contribution= Fi Fixe xed d Expen Expenses ses = Profit/Loss Or, Contribution - Fi

Marginal Cost Equation Sales = Varia Variable ble Cost Cost + Fixed Expenses Expenses +/+/- Profit Profit/Loss /Loss Or,

Sales  Variable Cost = Fixed Expen Expenses ses +/+/- Profit Profit/Loss /Loss

Or,

S-V=F+/- P

Or,

S-V=C, Where C stands stand s for f or Contribution Contribut ion (C (C=F+/-P)

Break

Even Point

BEP (in units) = Total

Fixed Expenses/SP per

unit - MC per uni unit unit, t, Where, SP is the Selling Selling Price and MC M C is the Marginal Cost Note: The Results obtained will be in units and not in value as the above formula is based on unit cost.

Profit Volume Ratio Profit/Volume Ratio is the ratio of

contribution to sales. It can be represented as follows: f ollows: P/V Ratio=Contribution/Sales

Pro fit/Sales Or, P/V Ratio=Fixed Expenses + Profit/Sales ex pressed in ote:: This Ratio can also be expressed Note percentage by multiplying multiplying it by 100.

Marginal Costing and Managerial ing g Decision Ma Mak kin In Cost Control In Profit Planning P lanning In Evaluating Performance In Making Important Decisions

Conclusion Marginal Costing supports the managerial decision making process . By the usage of  this technique , the manager can evaluate the positional standing of the concern to a certain extent.