Marginal Costing
This query is : Resolved
Achintya Singhal
(Querist)
30 July 2008
Dear Sir,
This Query relates to Marginal Costing.
There are two Companies with different Profit Volume Ratios.
The Fixed Cost of the Company having a higher Profit Volume Ratio is more.
In Case of higher demand which Company would earn more Profits and why
This Query relates to Marginal Costing.
There are two Companies with different Profit Volume Ratios.
The Fixed Cost of the Company having a higher Profit Volume Ratio is more.
In Case of higher demand which Company would earn more Profits and why
S.Srinivasaraghavan
(Expert)
30 July 2008
In case of higher demand or higher production and sale?
Achintya Singhal
(Querist)
30 July 2008
Thanks Buddy for taking out time for my Question.
I Meant in case of higher Production and Higher Sales.
I Meant in case of higher Production and Higher Sales.
30 July 2008
If the Fixed cost is not changed due to more production or more sales, then the high PV Ratio company will earn more profit.
Bcoz, the profit is totally depends upon the PV ratio and nature of fixed cost in marginal costing.
Bcoz, the profit is totally depends upon the PV ratio and nature of fixed cost in marginal costing.
CA Anand Sarda
(Expert)
30 July 2008
First Find Cost BEP,
Cost BEP is the point where the cost of both the companies are same at same sales point.
Then check the fixed cost.
The company having higher fixed cost will earn more profits during higher demand bcoz the company will have obligation of fixed cost.What ever extra sales made,the contribution of that will be profit.
Cost BEP is the point where the cost of both the companies are same at same sales point.
Then check the fixed cost.
The company having higher fixed cost will earn more profits during higher demand bcoz the company will have obligation of fixed cost.What ever extra sales made,the contribution of that will be profit.
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