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# Management accounting Cost Accounting f

By Jacqueline Cooper,2014-05-17 09:24
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Management accounting Cost Accounting f

1

MARGINAL COSTING

Statement of profit:-

Particulars Amount

Sales ***

Less:-Variable cost ***

Contribution ***

Less:- Fixed cost ***

Profit ***

1) Sales = Total cost + Profit = Variable cost + Fixed cost + Profit

2) Total Cost = Variable cost + Fixed cost

3) Variable cost = It changes directly in proportion with volume

4) Variable cost Ratio = {Variable cost / Sales} * 100

5) Sales Variable cost = Fixed cost + Profit

6) Contribution = Sales * P/V Ratio

7) Profit Volume Ratio [P/V Ratio]:-

? {Contribution / Sales} * 100

? {Contribution per unit / Sales per unit} * 100

? {Change in profit / Change in sales} * 100

? {Change in contribution / Change in sales} * 100

8) Break Even Point [BEP]:-

? Fixed cost / Contribution per unit [in units]

? Fixed cost / P/V Ratio [in value] (or) Fixed Cost * Sales value per unit

(Sales Variable cost per unit) 9) Margin of safety [MOP]

? Actual sales Break even sales

? Net profit / P/V Ratio

? Profit / Contribution per unit [In units]

10) Sales unit at Desired profit = {Fixed cost + Desired profit} / Cont. per unit

11) Sales value for Desired Profit = {Fixed cost + Desired profit} / P/V Ratio

2

12) At BEP Contribution = Fixed cost

13) Variable cost Ratio = Change in total cost * 100

Change in total sales

14) Indifference Point = Point at which two Product sales result in same amount of

profit

= Change in fixed cost (in units)

Change in variable cost per unit

= Change in fixed cost (in units)

Change in contribution per unit

= Change in Fixed cost (in Rs.)

Change in P/Ratio

= Change in Fixed cost (in Rs.)

Change in Variable cost ratio

15) Shut down point = Point at which each of division or product can be closed

= Maximum (or) Specific (or) Available fixed cost

P/V Ratio (or) Contribution per unit

If sales are less than shut down point then that product is to shut down.

Note :-

1) When comparison of profitability of two products if P/V Ratio of one product is

greater than P/V Ratio of other Product then it is more profitable.

2) In case of Indifference point if

Sales > Indifference point --- Select option with higher fixed cost (or) select

option with lower fixed cost.

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