Marginal Costing BY Prof. V.S Meena

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 (Fixed cost) Marginal costing is a variable cost.

BBreak even point (no Profit no loss) CCost volume profit (c/s x 100) MMarginal of Safety (S-BEP)

Break Even Point - llefoPNsn fcUnq js[kk fp= ds ek/;e ls fdl lhek rd oLrqvksa dk mRiknu vFkok foØ; djuk gkfuizn gS rFkk fdl fcUnq ds i’pkr ykHk izn gksxkA lkFk gh fdruh oLrqvksa dh fcØh ij fdruk ykHk gkfu jgsxhA ;g ckr lefoPNsn fcUnq ds vkxs & ihNs okyh fLFkfr ls Kkr gks tkrh gSA vr,o ;g js[kk fp= O;kolkf;;ksa ds fy, mi;ksfxrkiw.k gS %&

Example – Product (in units) Fixed Costs (in Rs.)2000 Variable Costs (50 paise per unit) Sales Price (Rs. 1 per Unit)

o x y Sales and costs (Rs.) Marginal of Safety Total Costs Sales Break Even Point Profit Variable Cost Fixed Cost Output in Units

Break Even Point Graph Break Even Point : - F x S S - V = 2000 x BEP=4000 Break Even Point is a No Profit No Loss That is : Fixed Cost = 2000 Variable Cost = 2000 Total Cost = = 4000 Total Sales = 4000 Profit & Loss = 4000 – 4000 = 0

bl izdkj ;fn ge Units dh fcØh dks vk/kkj ekudj fuEu dh x.kuk djrs gSA fn;k x;k gS & Product in Unit = Fixed Cost (Rs.) = 2000 Variable Cost = 5000 (50 Paise Pur Units) Sales = Kkr djuk gS & (1) BEP = F x S S - V = 2000 x BEP = 4000 (1) Margin of Safety :- Total Sales - BEP = 6000 lqj{kk lhek ftruh vf/kd gksxh mruh gh vPNh gSA

(3) Profit Volume Ratio - Profit Volume Ratio or P/V Ratio og nj gS ftlesa ek=k dh c<+ksRrjh ds lkFk ykHk c<+rk gSA ykHk ek=k vuqikr ] ek=k esa ifjorZu gksus ds Qy Lo:i ykHkksa esa tks ifjorZu gksrk gS mls Kkr djus dh dqath gSA Formula :- P/V Ratio = S - V S X X100 P/V Ratio == 50 %

;fn ges :- ykHk dekuk gks rks fcØh fdruh djuh gksxhA Example Fixed Cost = 2000 Profit Desired = P/V Ratio = 50% Formula - F + Pd P/V Ratio Sales in Rs. = % Sales in Rs. = = ]000 :- bfPNr ykHk dekus ds fy, gesa :- dh fcØh djuk gksxkA

Advantage of Marginal Costing :- (1)Easy To understand. (2)Helpful in Profit Planning. (3)Helpful in cost control. (4)Helpful in Decision Making : - (a)Make or Buy Decision (b)Capturing the foreign Markets. (c)Change of Product Mix

(d) Pricing – (I) Sales Price in Normal Condition (II) Determination of Minimum Price (III) Determination of Price below the Total cost. (IV) Temporary closure of production. (V) Permanent closure of the factory

THANKS