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CONTRIBUTION Contribution margin of a product is the difference between the selling price and its variable cost. It is obtained by subtracting marginal cost from sales revenue of a given activity. The difference between sales revenue and variable cost is called contribution since it contributes towards fixed expenses and profit of the entire business. It…
BREAK EVEN ANALYSIS GRAPH Break even analysis graph Break even Analysis is the analysis of three variables viz. Cost, Volume and Profit, which explores the relationship existing amongst Costs, Revenue, Activity Levels and the resulting Profit. It is also known as Cost Volume Profit Analysis. ACCORDING TO CHARTERED INSTITUTE OF MANAGEMENT ACCOUNTANTS, LONDON “CVP the…
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BREAK EVEN ANALYSIS Break Even Analysis is the analysis of three variables viz. Cost, Volume and Profit, which explores the relationship existing amongst Costs, Revenue, Activity Levels and the resulting Profit. It is also known as Cost Volume Profit Analysis. ACCORDING TO CHARTERED INSTITUTE OF MANAGEMENT ACCOUNTANTS, LONDON “CVP the study of the effects on…
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LIMITATIONS OF COST VOLUME PROFIT ANALYSIS Cost‐Volume‐Profit Analysis is the analysis of three variables viz. Cost, Volume and Profit, which explores the relationship existing amongst Costs, Revenue, Activity Levels and the resulting Profit. ACCORDING TO CHARTERED INSTITUTE OF MANAGEMENT ACCOUNTANTS, LONDON “CVP the study of the effects on future profit of changes in fixed cost,…
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COST VOLUME PROFIT ANALYSIS Cost Volume‐Profit Analysis is the analysis of three variables viz. Cost, Volume and Profit, which explores the relationship existing amongst Costs, Revenue, Activity Levels and the resulting Profit. The Cost Volume Profit Analysis is also known as Break even Analysis. ACCORDING TO CHARTERED INSTITUTE OF MANAGEMENT ACCOUNTANTS, LONDON “COST VOLUME PROFIT…
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APPLICATIONS OF MARGINAL COSTING Marginal costing is a technique of ascertaining cost used in any method of costing. According to this technique, variable costs are charged to cost units and the fixed cost attributable to the relevant period is written off in full against the contribution for that period. Contribution is the difference between sales…
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MARGINAL COSTING Marginal Costing is a technique of ascertaining cost used in any method of costing. According to this technique, variable costs are charged to cost units and the fixed cost attributable to the relevant period is written off in full against the contribution for that period. Contribution is the difference between sales value and…
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EQUIVALENT PRODUCTION Equivalent Production represents the production of a process in terms of completed units. In other words it means converting the incomplete production units into its equivalent of complete units. In each process an estimate is made of the percentage completion of any work-in-progress. A production schedule and a cost schedule will then be…
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BY- PRODUCTS The by products is a secondary product, which incidentally results from the manufacture of a main product. By products are also produced from the same raw material and same process operations but they are secondary results of operation. The main difference between the joint product and byproduct is that there is no intention…
JOINT PRODUCTS Joint products imply that they are produced from the same basic raw material, are comparatively of equal importance, are produced simultaneously by a common process and may require further processing after the point of separation. ACCORDING TO CHARTERED INSTITUTE OF MANAGEMENT ACCOUNTANTS, LONDON “Joint products is two or more products separated in the…
