Transcription of Inner-Intermediate IPC
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Inner-Intermediate IPC
12 Marginal costing Learning Objectives When you have finished studying this chapter, you should be able to Understand the difference between absorption costing and marginal costing Understand the concept of contribution and contribution to sales ratio. Understand the method of computation of break-even point, both mathematically and also with the help of a graph. Understand the basic limitations of break even analysis Definitions In order to appreciate the concept of marginal costing , it is necessary to study the definition of marginal costing and certain other terms associated with this technique.
Marginal Costing 12.3 Contribution – Fixed cost = Profit or, =` 30,000 – ` 40,000 = -` 10,000 The amount of ` 10,000 represent extent of loss since the fixed costs are more than the contribution. At the level of fixed cost of ` 30,000, there shall be no profit and no loss. 7. Key factor: Key factor or Limiting factor is a factor which at a particular time or over a
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