About Marginal Costing its advantages types, Breakeven point , Contribution etc

2.  Definition :-
Marginal Costing is defined as the amount at any
given volume of output by which aggregate costs
can be changed if the volume of output is
increased or decreased by one unit.
 Meaning :-
Marginal Costing is the technique of controlling by
bringing out the relationship between profit &
volume.

3.  The concept of Marginal Costing is also known as variable
costing because it is based on the behavior of costs that
vary with the volume of output.
 All the elements of cost (selling distribution) are divided
into Fixed & variable cost. Fixed Cost is also known as
Period Cost, it remains same irrespective of output, Eg :-
Building rent. Variable Cost is also known as Product Cost, it
varies directly with the output, Eg :- Cost of raw materials.

4.  Helps management in making decisions.
 Variable Cost are regarded as product cost.
 Fixed Cost are treated as period cost.
 The stock is valued at Marginal Costing.
 Prices are determined on the basis of Marginal Costing.

5.  Simply to operate and easy to understand
 Cost control
 Profit planning
 Helps determine breakeven point
 Decision making
 Management reporting
 Complimentary to Standard Costing & Budgetary Control
 Facilitates study of relative profitability

6.  Based upon number of assumptions
 Al cost are not divisible into fixed & variable
 Time factor is completely ignored
 Selling price, Fixed Cost & Variable Cost do not remain
constant
 Fixation of selling price in the long run cannot be done
without considering fixed cost.

7.  Contribution is the profit before adjusting fixed cost
 It is an assumption that excess of sales over variable cost
contributes to a fund not only which covers fixed cost but also
provides some profit
 If, Contribution = Fixed cost, company achieves breakeven
 This concepts helps in taking Decisions like :-
 Whether to produce or discontinue
 Fixing up selling price of bulk orders

8.  It is popularly known as P/V Ratio
 It expresses relationship between Contribution & Sales

9.  It is that stage where firm is making NO PROFIT, NO LOSS
 Total sales revenue = Total costs incurred

11.  It is the actual sales over & above the breakeven sales
 Thus it is the difference between actual & breakeven sales

12.  To earn the specific amount of profit