# Marginal Costing

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Marginal Costing
BY

Prof. V.S Meena
Marginal Costing
Meaning 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 (no Profit no loss)
 Cost volume profit (c/s x 100)
 Marginal of Safety (S-BEP)
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
y
10000

Profit
8000

6000

Variable
Cost
Break Even Point

4000
Marginal of Safety
Sales and costs (Rs.)

2000
Fixed
Cost

o         2000         4000     6000        8000   10000             x
Output in Units
Break Even Point Graph
Break Even Point : -   FxS         2000 x 4000
=
S-V         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 &                          FxS           2000 x 10000
(1) BEP =                  =
S-V           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 gSA

S-V
Formula :-       P/V Ratio =               X 100
S
10000 - 5000
P/V Ratio =                      X 100    = 50 %
10000
Example
;fn ges 10000 :- ykHk dekuk gks rks fcØh fdruh djuh gksxhA

Fixed Cost = 2000
Profit Desired = 10000
P/V Ratio = 50%

Formula -
F + Pd
Sales in Rs. =
P/V Ratio

2000 + 10000
Sales in Rs. =                      =   24000
50 %

10]000 :- bfPNr ykHk dekus ds fy, gesa 24000 :- dh fcØh djuk gksxkA
(1) Easy To understand.
(4) Helpful in Decision Making : -
(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
THANKS

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