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Marginal Costing

This document presents on the topic of marginal costing. It introduces marginal costing as the ascertainment of marginal costs and the effect on profit of changes in volume or output by differentiating between fixed and variable costs. It then provides key concepts in marginal costing including contribution, marginal cost equation, break-even point, profit volume ratio, and how marginal costing supports managerial decision making in areas like cost control, profit planning, performance evaluation, and important decisions. The presentation concludes that marginal costing supports the managerial decision making process.

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10K views8 pages

Marginal Costing

This document presents on the topic of marginal costing. It introduces marginal costing as the ascertainment of marginal costs and the effect on profit of changes in volume or output by differentiating between fixed and variable costs. It then provides key concepts in marginal costing including contribution, marginal cost equation, break-even point, profit volume ratio, and how marginal costing supports managerial decision making in areas like cost control, profit planning, performance evaluation, and important decisions. The presentation concludes that marginal costing supports the managerial decision making process.

Uploaded by

pritam pokhrel
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX or read online on Scribd
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PRESENTATION

ON
MARGINAL COSTING
To be presented by:
Muniram Prasad Sharma
Roll no: 14/09
2nd Semester
Introduction
Marginal Costing is the ascertainment
of marginal costs and the effect on
profit of changes in volume or output
by differentiating between fixed and
variable costs.
It is a costing technique of where only
variable cost will be charged to the
cost of unit produced.
Marginal Costing Concept of Profit

Contribution is the difference between the sale


value and the marginal cost of sales.

Contribution can be represented as:

Contribution= Selling Price – Marginal Cost

Or, Contribution= Fixed Expenses +/- Profit/Loss

Or, Contribution - Fixed Expenses = Profit/Loss


 
Marginal Cost Equation

Sales = Variable Cost + Fixed Expenses +/- Profit/Loss

Or, Sales – Variable Cost = Fixed Expenses +/- Profit/Loss

Or, S-V=F+/- P

Or, S-V=C, Where C stands for Contribution (C=F+/-P)


 
Break Even Point

BEP (in units) = Total Fixed Expenses/SP per


unit - MC per unit,
Where, SP is the Selling Price and MC is the
Marginal Cost
Note: The Results obtained will be in units and
not in value as the above formula is based on
unit cost.
Profit Volume Ratio
Profit/Volume Ratio is the ratio of contribution to
sales. It can be represented as follows:

P/V Ratio=Contribution/Sales

Or, P/V Ratio=Fixed Expenses + Profit/Sales

Note: This Ratio can also be expressed in


percentage by multiplying it by 100.
Marginal Costing and Managerial
Decision Making
In Cost Control

In Profit Planning

In Evaluating Performance

In Making Important Decisions


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 a
certain extent.

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