Professional Documents
Culture Documents
Marginal Costing Break Even Analysis
Marginal Costing Break Even Analysis
by
Dr. A. P. Ghosh
Managing Director
LATENT TALENT
DEVELOPERS AND
MANAGEMENT
CONSULTANTS (P) Ltd.
Marginal Costing
Break Even Analysis
Basic Formula :
S – V = F + P, where
S = Sales
V = Variable Cost
F = Fixed Cost
P = Profit
Marginal Costing
Break Even Analysis
Formulas to Calculate Break-Even Point
(BEP)
1. BEP (Units) Fixed Cost
Contribution per unit
4. BEP (Sales)
Total Fixed Cost x Selling Price per Unit
Contribution / Unit 1
Marginal Costing
Break Even Analysis
Profit Volume Ratio =
S – V x 100
S
Marginal Costing
Break Even Analysis
Margin of Safety (MS)
Margin of Safety is always related to profit.
Profit =
Formula: Profit = M.S. x P.V. Ratio
OR
MS = P / PV Ratio
Marginal Costing
Break Even Analysis
Another Formula for Margin of Safety –
Sales – BEP Sale x 100
Sales
Marginal Costing
Break Even Analysis
Drawing the BEP Chart
Marginal Costing
Break Even Analysis
KEY FACTOR
Formula:
Profitability = Contribution
Key Factor
Marginal Costing
Break Even Analysis
When two periods are given, the fixed cost
remains the same, the other costs, as well
as sales Price also remain the same.
Hence, P/V Ratio =
Difference in Profits x 100
Difference in Sales
Marginal Costing
Break Even Analysis
Sales Required to Earn a Desired Profit: