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Notes/CA Intermediate/Cost & Management Accounting

CA Intermediate · Cost & Management Accounting

Marginal Costing & CVP Analysis

Chapter 4 · 6 formulas · 4 exam-critical pointers

Core concepts

  1. 01Marginal cost = variable cost; charge fixed cost to period.
  2. 02Contribution = Sales − Variable Cost. Profit = Contribution − Fixed Cost.
  3. 03Break-even point: where total revenue = total cost.
  4. 04Margin of safety: actual/budgeted sales above BEP.
  5. 05Decision-making: make-or-buy, accept/reject special order, key factor analysis.

Flowchart summary

CVP Chart ₹ | /Total Cost | / /Sales | / / | / / <- BEP | / / |---/---------------- Loss / Profit | Volume

Exam-critical pointers

  • ⭐Marginal costing useful for short-run decisions where fixed costs don't change.
  • ⭐Composite BEP for multiple products needs sales mix to be constant.
  • ⭐Cash BEP excludes non-cash fixed costs (depreciation).
  • ⭐Limiting factor analysis: rank by contribution per unit of limiting factor.

Make it click

Formula sheet

  • Contribution = Sales − Variable Cost
  • P/V Ratio = (Contribution / Sales) × 100
  • BEP (units) = Fixed Cost / Contribution per unit
  • BEP (₹) = Fixed Cost / P/V Ratio
  • Margin of Safety = Actual Sales − BEP Sales
  • Required Sales for Target Profit = (Fixed Cost + Target Profit) / P/V Ratio

More from Cost & Management Accounting

  1. Ch 1Introduction to Cost & Management Accounting
  2. Ch 2Material Cost
  3. Ch 3Overheads — Absorption Costing
  4. Ch 5Standard Costing & Variance Analysis
  5. Ch 6Budgetary Control
All CA Intermediate notes →
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