Management Accounting

10

Marginal Costing and Cost–Volume–Profit Analysis

LEARNING OBJECTIVES

On completion of the study of the chapter, you should be able to understand:

• What is Marginal Cost?
• What is Marginal Costing?
• Features, advantages and limitations of Marginal Costing.
• Concept of Cost–Volume–Profit (CVP) analysis.
• Features and objectives of CVP Analysis.
• Classification of cost under Marginal Costing Technique.
• Elements of CVP Analysis.
• Marginal Cost equation.
• Concept of contribution, Break-Even (BE) point and margin of safety.
• Concept of Profit–volume ratio.
• Concept of BE Analysis.
• Concept of BE Chart and Angle of Incidence.
• Development of different formulae under CVP Analysis.

10.1 CONCEPT OF MARGINAL COST

According to the Chartered Institute of Management ...