Slide 1

Submitted by:Alekha MittalRoll no. 31MARGINAL COSTINGSubmitted to:

DEFINITION Marginal Costing is defined as the amount at any given volume of output by which aggregate costs can be changed if the volume of output is increased or decreased by one unit. In other words, Marginal Costing is the technique of controlling by bringing out the relationship between profit & volume.

INTRODUCTIONThe concept of Marginal Costing is also known as variable costing because it is based on the behavior of costs that vary with the volume of outputMarginal costing can be classified asFixed cost - The expenditure remains same irrespective of output. Costs which a firm has to incur irrespective of units of productionVariable cost - Cost varies directly with output. It is directly proportional to volume of production

CONCEPT OF CONTRIBUTIONContribution is the profit before adjusting fixed costan assumption that excess of sales over variable cost contributes to a fund not only which covers fixed cost but also provides some profit Contribution = Selling Price - Marginal Cost If, Contribution = Fixed cost, company achieves breakeven This concepts helps in taking Decisions like : Whether to produce or discontinue Fixing up selling price of bulk orders

Marginal Cost Income Statement

PROFIT VOLUME RATIOProfit/Volume Ratio is the ratio of contribution to sales. It can be represented as follows:P/V Ratio = Contribution/SalesP/V Ratio = Fixed Expenses + Profit/Sales

BREAK EVEN POINTIt is that stage where firm is making NO PROFIT, NO LOSS Total sales revenue = Total costs incurred

BREAK EVEN ANALYSIS

MARGIN OF SAFETYIt is the actual sales over & above the breakeven sales Thus it is the difference between actual & breakeven sales

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 ascertain extent.