Scribd Logo
Upload

Welcome to Scribd!

  • 246 views

    Cost Volume Profit Relationship

    Uploaded by

    Brianna Knowledge Resources
    Understand break even in a graphical and simplified manner. This presentation will definitely simplify concepts of costing and various techniques of costing like absorption costing and marginal costing

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPS, PDF, TXT or read online from Scribd

    Cost Volume Profit Relationship

    Uploaded by

    Brianna Knowledge Resources
    246 views14 pages
    Understand break even in a graphical and simplified manner. This presentation will definitely simplify concepts of costing and various techniques of costing like absorption costing and marginal costing

    Copyright

    © Attribution Non-Commercial (BY-NC)

    Available Formats

    PPS, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Understand break even in a graphical and simplified manner. This presentation will definitely simplify concepts of costing and various techniques of costing like absorption costing and marginal costing

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPS, PDF, TXT or read online from Scribd
    Download as pps, pdf, or txt
    246 views14 pages

    Cost Volume Profit Relationship

    Uploaded by

    Brianna Knowledge Resources
    Understand break even in a graphical and simplified manner. This presentation will definitely simplify concepts of costing and various techniques of costing like absorption costing and marginal costing

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPS, PDF, TXT or read online from Scribd
    Download as pps, pdf, or txt
    of 14

    Cost-Volume-Profit Relationship

     Nature of relationship

    Linear
     Assumptions under this concept are as
    follows-
     Costs are classified under fixed and variable
    costs.
     Selling price remains constant.
     Only one product is manufactured.
    What is Marginal Cost?
    “The amount at any given volume of output by
    which aggregate costs are changed if the
    volume of output is increased or decreased by
    one unit” ICMA, London

    “The ascertainment of marginal costs and of the


    effect on profit or changes in volume or type of
    output by differentiating between fixed costs and
    variable costs” ICMA, London
    Characteristics of Marginal costing
     Difference between product and period cost.
     Considered only those manufacturing costs
    that are dependant on the production volume.
     Prices are determined by adding the
    contribution with the marginal cost.
     It is helpful in decision-making.
    llustration
     Arrive at the marginal cost from the following
    information.
    No. of units produced   = 200

    Variable Cost     = Rs. 200/- unit.

    Fixed Cost    =Rs. 2,50,000

      2,50,000 +(200 × 200)


    =

    Total Cost = 2,90,000


    If we increase the number of units to 201,
    the variable costs will be = 201 × 200 =
    40,200
    Therefore, the total cost =  40200+ 250000

      =  290200

    Marginal Cost
    =  290200-290000

          =  Rs. 200/-


    Break Even Analysis
    Traditional Break Even Chart
    Contribution Break Even chart
    Mathematical representation of
    BEP
    Mathematically B.E.P. can be calculated by using the following formulae:-
    BEP(Units) = (Fixed cost) / (Selling price per unit – Variable cost per unit)
    or
    (Fixed cost) / (Contribution per unit)
    or
    (Break-even sales (Rs) / (Selling price per unit)

    BEP (Rs) = (Fixed costs × Sales) / (Sales – Variable cost)


    or
    (Fixed cost × selling price per unit) / (Selling price per unit- variable cost
    per unit)
    or
    (Fixed cost × selling price per unit) / (contribution per unit)
    or
    Fixed cost/ PV ratio
    Illustration
     Output: 6000 units
     Selling price per unit Rs.40
     Variable cost per unit Rs.30
     Total Fixed cost Rs.25000

    From the above information, calculate the


    break-even point in units and sales value

    You might also like