1. NAME : SNEHA .S
DEPT : B.COM A&F
SECTION : B
ROLL. NO : 20E1758
SUBJECT : MANAGEMENT ACCOUNTING
TOPIC : MARGINAL COSTING
2. PROFIT VOLUME RATIO : THE PROFIT VOLUME RATIO
(PVR) IS A MEASURE OF HOW MUCH PROFIT IS
EARNED ON EACH UNIT OF SALES.
MARGIN OF SAFETY : MARGIN OF SAFETY IS THE
DIFFERENCE BETWEEN THE ACTUAL LEVEL OF
SALES AND THE BREAK-EVEN POINT, EXPRESSED
AS A PERCENTAGE OF THE ACTUAL SALES. IT
MEASURES THE EXTENT TO WHICH SALES CAN
DECLINE BEFORE THE COMPANY STARTS MAKING
A LOSS.
3. BREAK EVEN POINT : THE BREAK-EVEN POINT IS
THE LEVEL OF SALES AT WHICH THE COMPANY’S
TOTAL REVENUE EQUALS ITS TOTAL COSTS,
RESULTING IN ZERO PROFIT.
CONTRIBUTION : CONTRIBUTION IS THE AMOUNT OF
EARNINGS REMAINING AFTER ALL DIRECT COSTS
HAVE BEEN SUBTRACTED FROM REVENUE
4. FORMULA
sales = fixed cost + variable cost / contribution
Profit = change in profit/change in sales ×100
Break even point = fixed cost / profit volume ratio
Margin of safety = sales – break even point
Value = profit/ contribution
Profit = contribution - fixed cost
5. Calculation of new profile/ sales
SALES = REQUIRED CONTRIBUTION / PROFIT VOLUME RATIO
QUANTITY = REQUIRED CONTRIBUTION / CONTRIBUTION PER
UNIT
PROFIT = CONTRIBUTION – FIXED COST
CONTRIBUTION = SALES × PROFIT VOLUME RATIO
6. You are given The following data for the year 2007 Of a
concern.
VARIABLE COST = 6,00,000
FIXED COST = 3,00,000
NET PROFIT = 10,00,000
SALES = 1,00,00
FIND ( A) P.V.RATIO (B) B.E.P (C) PROFIT WHEN SALES IS RS.12,00,000 AND (D)
SALES IN RUPEES TO EARN A PROFIT OF RS. 2,00,000.
