Question 1. A company producing 500 units its variable cost $200 per unit and sale price 250 per unit, fixed expenses are $12,000 per month. Required Calculate BEP in units and sales and show profit at 90% capacity. Answer (i). BEP (units) = Fixed Expenses / C = ($5,42,000 + $2,52,000) / 6 = 7,92,000 …
It is the duty of every management to take judicious decision. The success or failure depends upon the process of decision-making. The successful operation of business activities, management has to take various decision regarding production and sale, make or buy, the amount of desired profit, the expansion or closure of any line or product. The above said purposes the data are collected and analyzed by the management.
Marginal costing is a technique used for deciding break-even point. The BEP is a point where cost and revenues are always equal. It is that point where no profit, no loss is seen. Marginal costing is a technique which deals with the effect of cost or profit of change in volume of output and sale.
Here the expenses are divided into fix cost and variable costs, the fixed costs remain the same on different level of output. Variable costs always go up or down in proportion to output.
In this chapter, an attempt has been made to explain the salient features of various aspects of marginal costs, such as how much to produce for no profit no loss, what is margin of safety, what is desired profit, what is effect of mixed or merger of plants etc?
So, to explain the complete chapter of Marginal Costing, we have prepared some questions and explained them with the help of examples.