MARGINAL

COSTING
 PUNE DISTRICT EDUCATION
ASSOCIATION’S
PROF. RAMKRISHNA MORE ARTS,
COMMERCE & SCIENCE COLLEGE ,
AKURDI 411035
 Name :- Loya Vaishnavi Gokuldas
 Standard :- M.com Part 1
 Year :- 2021-2022
 Division :- C
 Roll No. :- 331100
 Subject :- Advance Cost Accounting and Cost
Control(IV)
 PPT Name :- Marginal Costing

 Subject Teacher :- Prof. Aliya Jamadar

 INDEX
 INTRODUCTION

 MEANING AND DEFINITION

 CHARACTRISTICS

 ADVANTAGES AND LIMITATIONS

 APPLICATION OF MARGINAL COSTING

 CONCLUSION
 INTRODUCTION
 MARGINAL COST :-
 Marginal cost refers to the movement in the total cost,
due to the production of an additional unit of output.
 MARGINAL COSTING :-

 Marginal costing is indicates the most traditional

technique which deals the concept of variable cost and
fixed cost which are marginal in nature.
MEANING AND DEFINITION
 MEANING
 Marginal costing is an accounting technique which ascertains
marginal cost by differentiating between fixed or period and
variable or product cost. It aims to charge directly with sales
volume.
 DEFINITION

 A costing principle whereby variable costs are charged to

cost units and the fixed costs are attributable to the relevant
period is written off full against the contribution for
that period.
CHARACTERISTICS
 ADVANTAGES AND
LIMITATION

REALIST
AID TO
REALATI
IC
CONSIST
PROFITVE
VALUATI
ADVAVTAGES ENCYPLANNI
ON OF
PROFITA
STOCKNGBILITY
REALISTI AID TO
C REALATIV
CONSISTE PROFIT E
VALUATIO
NCY PLANNIN PROFITABI
N OF
STOCK G LITY

LIMITATIONS
 APPLICATION OF MARGINAL
COSTING
1. CONTRIBUTION
 It is the profit before recovery of the fixed cost.

 Contribution = sales – variable cost

OR
 Contribution = Fixed cost + profit
OR
 Contribution = Fixed cost - Loss
2. PROFIT VOLUME RATIO
 The Profit Volume (P/V) Ratio is the measurement Of the rate
of change of profit due to change in volume of sales.

 P/V Ratio = Change in profit or Contribution/Change in

Sales × 100
OR
 P/V Ratio = Contribution/Sales × 100
3. BREAK-EVEN POINT
 The breakeven point (BEP) is the production level at
which total revenues equal total expenses.

 BEP (In sales) = Fixed cost / p/v ratio

 BEP (In units) = Fixed cost / Contribution per unit
4. MARGIN OF SAFETY
 The margin of safety is the amount of sales a company
can lose before it actually starts to lose money or stops
making a profit.
 Margin of Safety (In sales)

= Actual Sales - BEP Sales

 Margin of Safety (In unit)

= Actual Sales in unit– BEP sales in unit

 CONCLUSION
 Marginal costing is a useful analysis tool which usually
helps management make decisions and understand the
answer to specific questions about revenue.
 Marginal costing is useful in profit planning; it is helpful
to determine profitability at different level of production
and sale.
 Break even analysis and P/V ratio are useful techniques
of marginal costing.