sale-variable cost=(contribution)-fixed cost =(profit):this is the statement of
marginal cost.
(profit volume ratio)p/v ratio=contribution÷sales x 100
mos(margin of safety)=actual sales-break even point(BEP)sales.
mos(margin of safety)units=actual sales(units)-break even point(BEP)sales.(units)
BEP(rs)=fixed cost ÷ pv ratio
BEP(units)=fixed cost ÷ contribution per units
required sales(rs)=fixed cost+desired profit ÷ pv ratio
required sales(units)=fixed cost+desired profit ÷ contribution per unit .
( there is different formula for..when 2yr profit & sales are given)
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assumption of marginal costing
Marginal costing is the method of costing for evaluating the changes in total cost due to change in number of units produced.
marginal costing is recommended by IAS and absorption costing is not recommended by IAS,marginal costing is used for internal purposes and absorption costing is ysed for external purposes,in marginal costing the fixed production overheads are not calculated as a product cost and in absorption costing the fixed prodution overheads are calculated as product cost.
to calculate the profit easilly
Variable costing is called marginal costing while direct costing is separate concept.
assumption of marginal costing
Yes marginal costing is also sometimes called direct costing.
Marginal costing is the ascertainment of cost of one extra unit to be prepared or manufactured. Basically thee formula is- (Marginal Cost)n = (Total Cost)n - (Total Cost)n-1 for nth item . Through marginal costing we can ascertain whether our cost of production is rising, falling or constant and thus it helps in formation of a strategic plan for the enterprise.
Marginal costing is the method of costing for evaluating the changes in total cost due to change in number of units produced.
marginal costing is recommended by IAS and absorption costing is not recommended by IAS,marginal costing is used for internal purposes and absorption costing is ysed for external purposes,in marginal costing the fixed production overheads are not calculated as a product cost and in absorption costing the fixed prodution overheads are calculated as product cost.
to calculate the profit easilly
Variable costing is called marginal costing while direct costing is separate concept.
= http://wiki.answers.com/Q/Marginal_costing_and_absorption_costing_which_is_favourable" =
in marginal costing key factor and limitation factor is also available which may put limits on produduction unit and sales unit.
Marginal costing is one of the technique of costing and is usefull for the decision making process. As in decision making process decision are always made for the future activities and not for past activities so if exept marginal costing any other costing method for example absorption costing method is used then there is a chance of making wrong decisions as in future decision making past decision and past data is not relevent for decision making.
- The Marginal costing technique is appropriate for decision making as it highlights those costs (and revenues) which will change as a result of the decision under review being put into effect. - As fixed costs are mostly overheads, and, under marginal costing these are all treated as period costs and charged into the income statement therefore marginal costing avoids arbitrary allocation of overheads to units of output. - Reporting profit on a marginal costing basis will be more closely relates to changes in sales volume and are less affected by changes in inventory levels. - An understanding of the behavior of costs and the implications of contribution is vital for accountants and managers as the use of marginal costing for decision making is universal.
There are two type of costing are involved in a product or service. ie Direct cost and Indirect cost. In this two head there are two sub type costing are involved. ie Varriable cost and Fixed cost. Here the the total varriable cost are involved in a product of cost is called marginal costing. In another way the totoal cost -fixed cost is called marginal costing By M.Magesh 099948 33079