Cost volume profit analysis

Revision question on how to calculate break-even point and margin of safety.

Bonne Bia limited is a newly formed company in the catering business founded by Kate and Paul Johnson. Kate and Paul have considerable experience in the food industry and saw an opportunity to establish a food/beverage business to service the tourist market during the four months from May to August. The business will be located in Wexford and permission has … Read the rest

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Significance of profit-volume (PV) ratio

The profit volume ratio or P/V ratio is the ratio or percentage of contribution margin to sales. This ratio is also known as marginal income ratio, contribution to sales ratio or variable profit ratio. The profit volume ratio usually expressed in percentage is the rate at which profit increases with the increase in the volume.

The profit volume (or contribution-sales) … Read the rest

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Six (6) disadvantages of using marginal costing.

Marginal Costing is a costing technique wherein the marginal cost, i.e. variable cost is charged to units of cost, while the fixed cost for the period is completely written off against the contribution.

Disadvantages of using marginal or direct costing include the following:

Separation of costs into fixed and variable costs might be difficult, … Read the rest

9 benefits of marginal costing

9 benefits of marginal costing.

Marginal or direct costing is the accounting system in which variable costs are charged to cost units and fixed costs of the period are written off in full against the aggregate contribution.

Arguments for (benefits)  the use of marginal or direct costing include the following:

  • For non-profit planning purposes, management requires cost volume and profit relationship data, which
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