# marginal costing basics

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Category: Education

## Presentation Description

marginal costing basics

## Presentation Transcript

### MARGINALCOSTING :

MARGINALCOSTING BY: ASHISH AGGARWAL FAYOL HOUSE 10101028HARYANA SCHOOL OF BUSINESSGJUS&T, HISSAR

### Marginal Costing :

Marginal Costing Meaning of Marginal cost – Marginal cost means that increase of total cost witch happens by increased or decreased by one unit in the production volume. Example – Unit Total cost Rs. Marginal cost Rs. 0 500 (Fixed cost) - 1 800 300 2 1100 600 3 1400 900 Marginal costing is a variable cost.

### CONCEPT :

CONCEPT Prime cost Fixed Cost Variable Cost Contribution Profit Loss Break even point concept

### Basic Equation:Variable Cost = Direct Materials + Direct Labor + Direct ExpensesVariable cost per unit = Difference in cost / Difference in Activity levelVariable Cost is also called as Marginal Cost. :

Basic Equation:Variable Cost = Direct Materials + Direct Labor + Direct ExpensesVariable cost per unit = Difference in cost / Difference in Activity levelVariable Cost is also called as Marginal Cost.

### Marginal Cost Equation:Sales (S) = Variable Cost (V) + Fixed Expenses (F) + or – Profit (P) / Loss (L)S = SalesV = Variable CostF = Fixed Expenses+P = Profit-P = LossSales - Variable Cost = Fixed Expenses + or – Profit / LossS - V = F + or – P :

Marginal Cost Equation:Sales (S) = Variable Cost (V) + Fixed Expenses (F) + or – Profit (P) / Loss (L)S = SalesV = Variable CostF = Fixed Expenses+P = Profit-P = LossSales - Variable Cost = Fixed Expenses + or – Profit / LossS - V = F + or – P

### Slide 6:

Contribution: Sales – Variable Cost = Contribution = S - V Fixed Expenses + or – Profit / Loss = Contribution = F + or – P In simple form, S – V = F + or – P

### Slide 7:

Break Even Point: A business is said to break even when its total sales are equal to its total costs. It is a point where There is no profit or no loss. Contribution is equal to Fixed Expenses.

### Assumptions :

Assumptions Fixed cost remains unchanged. Per unit SP remains constant. Per unit variable cost of a product remains constant.

### How To Calculate? :

How To Calculate? Equation Method High and low points Method Least square Analytical method

### Use in Business decision making :

Use in Business decision making Make OR Buy decision Change in product Mix Pricing decision

### Slide 11: 