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Project
MFC
COST ACCOUNTING
Semester - II
Tanu Agrawal
• If variable costs per unit are Rs.9 and fixed costs are
Rs.2,50,000 per annum, an output of 40,000 units per
annum results in the following expenditure:
Variable cost of 40,000 units @ Rs.9/unit 3,60,000
Fixed Cost 2,50,000
Total Cost for output of 40,000 units 6,10,000
Variable costs of 40,001 units @ Rs.9/unit 3,60,009
Fixed Cost 2,50,000
Total Cost Total Cost for output of 40,001 units 6,10,009
Less: Total Cost for output of 40,000 units 6,10,000
Marginal cost 9
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• Thus, in this context we can say that marginal
costing is not a system of costing in the sense in
which other systems of costing, like process or
job costing are, but it has been designed simply
as an approach to the presentation of
accounting information meaningful to
management from the viewpoint of adjudging
the profitability of an enterprise by carefully
studying the impact of the entire range of costs
according to their respective nature.
20 2 3.6 -1.6
25 2.5 3.7 -1.2
30 3 3.8 -0.8
35 3.5 3.9 -0.4
40 4 4 —
50 5 4.2 0.8
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• Rs.1.6 lakh. However, as more and more units
are sold the loss goes on decreasing. When
sales are 40,000 units there is no loss. When
sales increase beyond 40,000 units the firm
earns a profit.
• The above situation can be represented on a
graph as follows:
50,000
$ $ $ $
-2 -4 2 2
Rs. Rs.
Here we see that accepting the order adds Rs.0.05 per bar or Rs.50,000 in total, to
Crisp Chocolate’s profit. If no other factors affect the decision, the order should be
accepted.
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• OTHER ASPECTS
Other factors may influence special-order pricing decisions.
These may be,
• Effect on regular customers: If regular customers are
paying more, they may demand price deductions or stop
buying from the company.
• Special order customers turning regular customers:
Another problem is that special order customers may
decide to become regular customers, and changes in the
price may become necessary.
• Q1 (d),
• Q2 (b),
• Q3 (c),
• Q4 (d),
• Q5 (b),
• Q6 (c),
To: tanu.agr@gmail.com
CC: manoj.amity@panafnet.com