Marginal CostingMeaning 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.
Break Even Point -
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) - 2000 4000 6000 8000 10000
Fixed Costs (in Rs.) 2000 2000 2000 2000 2000
Variable Costs (50 paise per unit) 1000 2000 3000 4000 5000
Sales Price (Rs. 1 per Unit) 2000 4000 6000 8000 10000
o x
y
8000
6000
4000
2000
Sal
es a
nd c
osts
(R
s.) Marginal of Safety
Total Costs
Sales
Break Even Point
Profit
Variable Cost
10000
Fixed Cost
2000 4000 6000 8000 10000
Output in Units
Break Even Point GraphBreak Even Point : - F x S
S - V=
2000 x 4000
4000 - 2000
BEP = 4000
Break Even Point is a No Profit No Loss
That is : Fixed Cost = 2000 Variable Cost = 2000
Total Cost = 2000+2000 = 4000
Total Sales = 4000
Profit & Loss = 4000 – 4000 = 0
bl izdkj ;fn ge 10000 Units dh fcØh dks vk/kkj ekudj fuEu dh x.kuk djrs gSA fn;k x;k gS & Product in Unit = 10000
Fixed Cost (Rs.) = 2000
Variable Cost = 5000
(50 Paise Pur Units)
Sales = 10000
Kkr djuk gS & (1) BEP =F x S
S - V=
2000 x 10000
10000 - 5000
BEP = 4000
(1) Margin of Safety :-
Total Sales - BEP
10000 - 4000 = 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 gSAFormula :- P/V Ratio =
S - V
SX 100
10000 - 5000
10000X 100P/V Ratio = = 50 %
;fn ges 10000 :- ykHk dekuk gks rks fcØh fdruh djuh gksxhA
Example
Fixed Cost = 2000Profit Desired = 10000P/V Ratio = 50%
Formula - F + Pd
P/V RatioSales in Rs. =
2000 + 10000
50 %Sales in Rs. = = 24000
10]000 :- bfPNr ykHk dekus ds fy, gesa 24000 :- 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