MARGINAL COSTING AND ABSORPTION COSTING
Formula
Contribution
Sale
Profit –Volume (P/V) Ratio
Breakeven Point:
Margin of safety:
1) Contribution
Contribution= Sales-Variable cost
Or
Contribution= F+P
Contribution= Sales X PV Ratio
2) Sale
Sales = Variable Cost + Contribution
Sales = Contribution
PV Ratio
3) Profit –Volume (P/V) Ratio
P/V Ratio = Contribution X 100
Sales
P/V Ratio = Difference in Profits
Difference in sales
4) Breakeven point
Breakeven point (in units)= Fixed cost
Contribution per unit
Break–even Point (in Rs.) = Fixed Cost x sales
Contribution per unit
5) Margin of safety:
Margin of Safety = Actual Sales-Break even sales
Margin of safety = Net profit
P/V Ratio
6) Required Sales
Required Sales= Fixed Cost + Desired Profit
PV Ratio
Required Sales( in Units) = Fixed Cost + Desired Profit
Contribution Per Unit
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