Marginal Costing

BY
Shikha sharma
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 1000
0

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 1000
0
y
10000

Profit
8000

6000
ales
S
Variable
Break Even Point l C osts Cost
a
Tot
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 & (1) BEP =

FxS
=
2000 x 10000

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
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
THANKS