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Marginal cost accounting is identical with variable prices
by Theglobaltutors Thehomework Help ***
Marginal cost accounting
is identical with variable prices, prime prices and variable expenses
among the short term however, in ways, would conjointly contain charge
among the design production activities on the terribly long-standing
frame swing up an increase within the productive capability of economic.
Therefore in creating choices troubles; price is connected to change in
output below explicit conditions of the case.
http://www.theglobaltutors.com/finance-assignment-help/Marginal-Costing.aspx
Theoretically incremental cost and price would be the similar. If there’s no modification in {fixed cost fixed charge fixed prices charge} then these 2 costs goes to be similar. Therefore price doesn’t contain charge some whereas incremental cost could comprise some charge too if charge changes due to a selection.
1 | Marginal Costing Equation | Sales - VC = FC + Profit | |
2 | Contribution | Sales - VC | |
Profit + FC | |||
3 | Profit Volume Ratio (In Marginal Costing, Profit = Contribution) (Profit = EBIT) | Contribution / Sales | |
Change in Profit / Change in Sales | |||
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 | ||
FC = Fixed Cost; VC = Variable Cost; PV Ratio = Profit Volume Ratio
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