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  • Marginal Costing Formulae by Urvashi D. Maharshi

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    This document outlines 16 marginal costing formulae used to calculate key metrics like contribution, break even point, margin of safety, and profitability ratios. The formulae define relationships between sales, variable costs, fixed costs, contribution, profit, and break even sales. They allow for calculating metrics like profit, break even sales, margin of safety, and profit-volume ratios through substitution of data in the defined equations.

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    This document outlines 16 marginal costing formulae used to calculate key metrics like contribution, break even point, margin of safety, and profitability ratios. The formulae define relationships between sales, variable costs, fixed costs, contribution, profit, and break even sales. They allow for calculating metrics like profit, break even sales, margin of safety, and profit-volume ratios through substitution of data in the defined equations.

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    © All Rights Reserved
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    5 views1 page

    Marginal Costing Formulae by Urvashi D. Maharshi

    Uploaded by

    yesh rak
    This document outlines 16 marginal costing formulae used to calculate key metrics like contribution, break even point, margin of safety, and profitability ratios. The formulae define relationships between sales, variable costs, fixed costs, contribution, profit, and break even sales. They allow for calculating metrics like profit, break even sales, margin of safety, and profit-volume ratios through substitution of data in the defined equations.

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    © All Rights Reserved
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    MARGINAL COSTING FORMULAE By Urvashi D.

    Maharshi
    PCC/IPCC/FINAL urvashimaharshi@gmail.com

    Basic Formulae:

    1. Sales – Variable Cost = Fixed Cost + Profit or Contribution

    2. Sales (Sales – Variable Cost) = Fixed Cost + Profit


    Sales

    3. P/V Ratio = Sales – Variable Cost


    Sales
    4. Sales x P/V Ratio = Fixed Cost + Profit

    5. Break even sales = Fixed Cost OR BES x P/V Ratio = Fixed Cost
    P/V Ratio

    6. P/V Ratio = Fixed Cost


    Break even sales

    7. (BES + MS) x P/V Ratio = Contribution [Total sales = BES + MS]

    8. (BES x P/V Ratio) + (MS x P/V Ratio) = Fixed Cost + Profit

    9. Margin of Safety x P/V Ratio = Profit

    10. P/V Ratio = Contribution


    Sales

    11. P/V Ratio = Change in profit


    Change in sales

    12. P/V Ratio = Change in Contribution


    Change in sales

    13. Profitability = Contribution


    Key factor

    14. Margin of Safety = Total sales – BES

    15. BES = Total sales – MS

    16. Margin of Sales Ratio = Total Sales – BES


    Total Sales

    Note: At BEP profit is zero. Prepare income statement for substituting data in the required formula easily.

    By Urvashi D. Maharshi urvashimaharshi@gmail.com

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