MARGINAL COSTING AND ABSORPTION COSTING 

Formula 

Contribution

Sale

Profit –Volume (P/V) Ratio

Breakeven Point:

Margin of safety: 

MARGINAL COSTING AND ABSORPTION COSTING LECTURE MUMBAI UNIVERSITY IDOL



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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