Variable Cost : It is the amount by which total cost changes, if the output quantity is changed by one unit. Variable cost = Prime cost + Variable overheads. Advertisement Advertisement
Net Profit : It is the final net profit, earned by the company. Net Profit = Sales – Variable cost – Fixed Cost or Net Profit = Contribution – Fixed Cost.
Profit Volume Ratio ( P.V. ratio ) : This is also known as. “Contribution to sales Ratio”. This tries to establish the relationship between cost, Profit and volume. When volume ( sales quantity ) changes, the profit margin will also change. P. V. ratio ascertains the impact of profit,...
Break Even Point ( BEP ) : BEP means the point of no profit or no loss. BEP is the output level or sales value, at which the Total cost is equal to Total sales. Revenue below BEP, the business will incur losses. Above BEP, the business will earn...
In Marginal costing, total cost is divided into variable cost & fixed cost. Variable cost amount will change in relation to changes in levels of output quantity. In Marginal costing, variable cost is given utmost importance. In Marginal costing, the effect on profit, on A/c of changes in output...
P.R.S. is a statement prepared to reconcile the difference between : A) Net profit as per Cost Accounts ( as per cost – sheet ) AND B) Net profit as per Financial Accounts ( as per profit and loss A/c ) When net profit as per cost – accounts...
Classify the following items into direct and indirect cost: Soln: Items Classification (i) Carriage expenses on raw materials Direct Cost (ii) Advertisement expenses Indirect Cost (iii) Office Rent Indirect Cost (iv) Packing expenses Indirect Cost (v) Workers Wages Direct Cost (vi) Raw material charges
Classify the following items of cost and justify the same: (a) Indirect wages (b) Carriage outward (c) Depreciation of delivery vans. (d) Raw material purchased. (e) Foreman’s wages. (f) Director’s fees. (g) Free samples. (h) Heat light and power. (i) Consumable stores. (j) Direct expenses. Soln: Cost...
Classify the following items on the basis of cost: (a) On the basis of functions: (i) Legal expenses (ii) Rent of warehouse (iii) Packing expenses (iv) Fuel and oil. (b) On the basis of traceability to product: (i) Office cleaning (ii) Factory supervision (iii) Freight inward charges (iv)...
Classify the following items into direct and indirect cost: (i) Carriage outwards ` 800. (ii) Cost of raw materials ` 1,200. (iii) Depreciation on office furniture ` 400. (iv) Advertising expense ` 750. (v) Factory Rent ` 600. (vi) Salesman’s commission ` 200. Soln: (i) Indirect Cost (ii)...
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