CHAPTER NO 1 RESEARCH METHODOLOGY

1.1. INTRODUCTION OF STUDY

Marginal costing is a very important technique for decision making.
The concept of marginal cost is based on the variable cost and fixed cost of
the production. Variable expenses depend on sales and production of the
company, when fixed cost is periodic cost. Marginal cost is increase or
decrease in cost to produce of a unit after certain production units.
Generally, marginal costing depends on the contribution, where contribution
is the difference between the sales and the variable cost of the production.
The company's contribution is more than its fixed cost as it is more
profitable. This technique assumes that other conditions are also not
changed. E.g., materials, Labour, Efficiency, Wastage loss, managerial policy
and competition level etc.
Marginal Cost performance analysis is a term used to describe the
change in total cost of production resulting from the addition of one item. It
can also be seen as the avoidable cost of not producing an additional item. It
is usual to look at short term marginal cost, which is an additional cost when
only some of the cost of production can be varied in long term or more
commonly known as long run marginal cost is the change in cost when all
input cost can varied. It is closely related to marginal cost pricing, in which
prices are set at an amount equal to the Marginal Cost. The marginal cost is
the cost to produce one additional unit. This cost would include the raw
materials used to make the item, the average labor cost of the item, the
average machine or hardware cost associated with creating the item.
Marginal costs are sometimes very difficult to assess. First, we must
determine the useful life of our machinery that can be a very subjective
determination. Marginal Costing is the ascertainment of marginal cost and of
the effect on profit due to changes in volume or type of output by different
between fixed cost and variable cost.
Marginal Cost = (Change in Cost / Change in Quantity)
1.2. NEED FOR THE STUDY / PROBLRM OF THE STUDY
The need of the study helps the Pipe Tech Hydraulic Manufacturing
Company to identify their position by which the company can increase or
decrease the total cost of production. It also helps to the company to identify
and offer a minimum rate of product price according to the expectations of
the customer so that the company’s sales level will get increased. Hence, this
study has been carried on marginal cost analysis.

1.3. OBJECTIVES OF THE STUDY

 An Analysis about Marginal Cost Technique in PIPE TECH HYDRAULIC
MANUFACTURING COMPANY.
 To examine Profit-volume ratio, Break-even point and Margin of safety
of PIPE TECH HYDRAULIC MANUFACTURING COMPANY.
 To study the progress of PIPE TECH HYDRAULIC MANUFACTURING
COMPANY.
 To help PIPE TECH HYDRAULIC MANUFACTURING COMPANY to make
decision by using Marginal costing techniques.

1.4. JUSTIFICATION OF THE STUDY

The marginal cost technique is not the same as job or batch costing,

process costing, contract costing, or operating. All costing methods are used to
calculate the cost of products or services. Only variable costs of manufacturing
are included in the unit cost in the Marginal Costing Technique. Through the
concept of marginal costing techniques had been adopted by many
establishment, the assumption couple with other difficulties in its application as
mentioned under the statement of the problem, justified the need of this
study.

(1) Marginal costing system is very useful for internal purposes – decision

making, planning and control.

(2) Calculation of cost of sales, under marginal costing system, is very simple to
understand.
1.5. STATEMENT OF HYPOTHESIS

A hypothesis is a tentative statement, which is subject to the proof. The

following hypotheses are considered as the basis for the questions set for this
study.

HO - NULL HYPOTHESIS

H1 - ALTERNATIVE HYPOTHESIS

 Ho: Marginal decisions are not positively affected by marginal costing

techniques.
 H1: Marginal decisions are positively affected by marginal costing
techniques.
 Ho:  Marginal costing technique is not determines the profit of an
organization.
 H1: Marginal costing technique is used to determine the profit of an
organization.
 HO. Marginal costing technique does not helps to PIPE TECH HYDRAULIC
MANUFACTURING COMPANY to make decision
 H1: Marginal costing technique helps to PIPE TECH HYDRAULIC
MANUFACTURING COMPANY to make decision.

1.5. JUSTIFICATION OF HYPOTHESIS

In statistical hypothesis testing, to prove the alternative hypothesis is true, it

should be shown that the data is contradictory to the null hypothesis. Namely,
there is sufficient evidence against null hypothesis to demonstrate that the
alternative hypothesis is true.

1.6. SOURCES OF DATA

i. PRIMARY DATA

 The data is collected through the primary source, which include

questionnaires and personal interviews.
  The primary data for the year 2021-2022 refers to original information
gathered for a specific purpose and provides up to date, accurate and
relevant information and it is collected according to the needs of the study.
The primary data were collected by survey method with the help of
questionnaires and interviews, personal observation, direct consultation
with farmers, and dealers and sub-dealer.

ii. SECONDARY DATA

 The secondary data can be defined as data collected by someone else for
purposes other than solving problem being investigation and books,
periodical, journals, office records, papers, company records, internet etc.

1.7. METHOD OF STUDY

 Quantitative methods do a much better job of answering how many and

how many types of questions and are used to measure product
performance against itself or its competition. Quantitative data is often
useful for exploring an issue. It helps you understand the thought processes
of the user.

It can be used to:

a. Compare two or more formulas while doing usability testing.

b. Compute expected cost savings from the changes you will make.
c. Conduct quick easy and dry research.

 In this study Analytical Method is used. Analytical method is use to

calculate marginal costing techniques and it is determined on the basis of
past records. It helps to collect data. Research methodology is a way to
systematically solve the research problem

1.8. LIMITATIONS OF DATA

  The data taken here of PIPE TECH HYDRAULIC MANUFACTURING COMPANY
is limited to one financial months only.
 The point of view of analyzing the above data by us and by the company
may vary.
 The data may not be useful in studying any other year except the above
listed 2021-2022
 The point considered by us as negative one may be the positive one from
the view point of company.

1.9. TECHNIQUE OF ANALYSIS

Marginal Costing technique is helpful for cost control, cost management and to
make decision for Pipe Tech Hydraulic MANUFACTURING Company. It is easier for
the businesses to manage and utilize the resources well and to study the impacts
of marginal costing.

Tools to be used

 Profit volume Ratio

 Margin of safety
 Break-Even Point

1.10 SCHEME OF THE REPORT

1. Introduction of the study

Marginal costing is a very important technique for decision making. The
concept of marginal cost is based on the variable cost and fixed cost of the
production. Variable expenses depend on sales and production of the
company, when fixed cost is periodic cost. Marginal cost is increase or
decrease in cost to produce of a unit after certain production units. Generally,
marginal costing depends on the contribution, where contribution is the
difference between the sales and the variable cost of the production. The
company's contribution is more than its fixed cost as it is more profitable. This
technique assumes that other conditions are also not changed. E.g., materials,
Labour, Efficiency, Wastage loss, managerial policy and competition level etc.
2. Profile of the PIPE TECH HYDRAULIC MANUFACTURING COMPANY
A. Vision
The vision of Pipe Tech Hydraulic Manufacturing Company. Is to continue
the heritage of our Company and be a premier Indian manufacturer of top
quality products.
B. Mission

C. Objective
1. To examine Profit-volume ratio, Break-even point and Margin of
safety of PIPE TECH HYDRAULIC MANUFACTURING COMPANY.
2. To study the progress of PIPE TECH HYDRAULIC MANUFACTURING
COMPANY.
3. To evaluate Marginal cost and Profitability of PIPE TECH HYDRAULIC
MANUFACTURING COMPANY.
4. To help PIPE TECH HYDRAULIC MANUFACTURING COMPANY to
make decision by using Marginal costing techniques
3. Research Methodology
 In this study Analytical Method is used. Analytical method is use to
calculate marginal costing techniques and it is determined on the basis
of past records. It helps to collect data. Research methodology is a way
to systematically solve the research problem.
 Quantitative methods do a much better job of answering how many and
how many types of questions and are used to measure product
performance against itself or its competition.

4. Marginal Costing
The term ‘marginal costing’ has been defined by the Chartered Institute of
Management Accountants (CIMA), London, as –“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. Its special value is
in decision-making.”
5. Data Analysis and Interpretation

6. Conclusion and suggestion

7. Bibliography
 CHAPTER NO 2. THEORETICAL ASPECTS AND SUBJECT LITERATURE

4.1 INTRODUCTION

Marginal costing is a technique/system of presentation of sales and cost data

with a view to guide the managers for taking short term decisions like sales
mix selection, make or buy, acceptance of special order, etc. It is also used by
the managers for cost control, budgeting and profit planning purposes.

The marginal costing technique is crucial for any business aiming to optimize the
production of goods or delivery of services. The concept technically means extra
costs added to the production cost due to additional unit(s). It helps companies
determine the selling price of a product or service. Furthermore, they can
estimate the desired output by understanding marginal and sales costs. It simply
works like this:

 Sale or Unit price > Marginal cost = More production = Profit

 Marginal cost > Sale or Unit price = Less production = Loss

Moreover, entities can calculate the price associated with resources needed to
scale up the production of additionally ordered items. Also, it enables managers
to estimate production expenses and budget, avoiding last-minute resource
shortages.

Marginal costing varies with the production level and volume. Based on this, it
can be either short-run (i.e., fixed costs for additional production in a short time)
or long-run (i.e., variable inputs for extra output in more time).

SOME IMPORTANT KEY POINTS

 Marginal costing is the increase or decrease in the overall cost of production due
to changes in the quantity of desired output.
 Managers can use it to make resource allocation decisions, optimize production,
streamline operations, control manufacturing costs, plan budgets and profits, and
so on.
 In most cases, variable costs influence marginal costs. It can, however, consider
fixed expenses in circumstances of increased output.
 When a company’s marginal cost equals its marginal income, it maximizes profits
while setting the selling price of a product or service.

2.2. MEANING DEFINITION AND CONCEPTS

2.2.1 MEANING

“Ascertainment of marginal costs and of the effect on profit of change in

volume or type of output by differentiating between fixed costs and variable
costs. Note – In this method of costing, only variable costs are charged to
operations, processes or products while fixed costs are written-off against
profits in the period in which they arise. The system of marginal costing,
therefore, is a technique of cost accounting which differentiates between fixed
costs and variable costs and shows the effect on profit of changes in the
volume of output”.

One additional-unit of production is known as marginal unit and the change in

total cost on account of adding or subtracting one unit is known as marginal
cost.

“Marginal costing is that technique which studies the increase or decrease in

total cost as a result of increase or decrease of one unit of production.”

“Marginal costing is the ascertainment by differentiating between fixed and

variable costs.” – (I.C.M.A. London)

2.2.2 DEFINITIONS

 MARGINAL COSTING
Marginal costing is used for managerial decision-making. It can be used in
conjunction with any method of costing, such as job costing or process costing.
It can also be used with other techniques of costing like standard costing and
budgetary control. In this, only variable cost is considered.
The term ‘marginal costing’ has been defined by the Chartered Institute of
Management Accountants (CIMA), London, as –“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. Its special value is in
decision-making.”

 MARGINAL COST: 

Marginal cost is the amount at any given volume of output by which aggregate
cost are changed of the volume of output is increased or decrease by one unit.
The marginal cost of a product is alternatively known as its variable cost, which
includes direct material, direct labor and direct experiences and the variable part
of overheads.   

 FIXED COST:

Fixed cost is a cost that accrues in relation to the passage of time and which,
within certain output and turnover limits, tends to be unaffected by
fluctuations in the level of activity. It is treated as period cost and is charged in
full to the profit and loss account of the accounting period which they are
incurred.

 CONTRIBUTION:

Contribution is the different between sales value at the variable cost of those
sales expressed either in absolute terms or as a contribution per unit.  This is
the central point in marginal costing.  When the contribution per unit is
expressed as the different between the selling price and its marginal cost.
Marginal costing cannot be used without calculating the contribution
 2.2.3. MARGINAL COSTING FORMULAS

Marginal Costing equation, profit volume ratio, Break-even point, Margin of

safety ,cost break-even point, finding  the selling price, finding the profit,.

1 Marginal Costing Equation Sales – VC = FC + Profit

2 Contribution Sales – VC

Profit + FC

3 Profit Volume Ratio Contribution / Sales

(In Marginal Costing,

Profit = Contribution) Change in Profit / Change in Sales

(Profit = EBIT) Change in Contribution / Change in Sales

100% – VC Ratio (PV % + VC % = 100% of Sales)

4 Break Even Point Total Revenue = Total Cost

Break Even Point(In Rupees) FC / PV Ratio

Break Even Point(In Rupees) Break Even Point * Selling Price

Break Even Point(Quantity) FC / Contribution Per Unit

Note: At BEP, Total Contribution = Total Fixed Cost

5 Margin Of Safety Total Sales – Break even Sales

Margin Of Safety(In Rupees) Profit / PV Ratio

 Margin Of Safety(Quantity) Profit / Contribution Per Unit

6 Indifference Point / Cost Break Even Total Sales = Total Profits

Point

(In Rupees) Difference in FC / Difference in VCR

(In Rupees) FC / PVR

(In Quantity) Difference in FC / Difference in VC Per Unit

(In Quantity) Difference in FC / Difference in Contribution Per

Unit

2.2.4. Advantages And Disadvantages

Correct marginal costs estimation can help managers develop budget and profit
plans for the next production cycle. It means an inaccurate calculation can lead to
massive losses to manufacturing units. Thus, it has both pros and cons, which are
as follows:

Advantages Disadvantages

Classifies costs as fixed and variable Efficiency of resources and other factors
could also affect the marginal cost

No overhead pricing included Does not consider time as a factor

Easy cost ascertainment Not suitable for all sectors

Helps in effective decision-making, whether it is to

replace a machine or discontinue a product or service
 Cost comparison becomes easy

2.2.5. CHARACTERISTICS OF MARGINAL COSTING

The technique of marginal costing is based on the distinction between product

costs and period costs. Only the variables costs are regarded as the costs of
the products while the fixed costs are treated as period costs which will be
incurred during the period regardless of the volume of output. The main
characteristics of marginal costing are as follows:

1. All elements of cost are classified into fixed and variable components. Semi-
variable costs are also analyzed into fixed and variable elements.

2. The marginal or variable costs (as direct material, direct labor and variable
factory overheads) are treated as the cost of product.

3. Under marginal costing, the value of finished goods and work-in-progress is

also comprised only of marginal costs. Variable selling and distribution are
excluded for valuing these inventories. Fixed costs are not considered for
valuation of closing stock of finished goods and closing WIP.

4. Fixed costs are treated as period costs and are charged to profit and loss
account for the period for which they are incurred.

5. Prices are determined with reference to marginal costs and contribution

margin.

6. Profitability of departments and products is determined with reference to

their contribution margin.

7. Cost of sales are calculated after taking all variable costs (e.g., direct
materials, direct labor, direct expenses, variable production, selling and
administrative overheads).

8. The difference between sales revenue and cost of sales is called

contribution. Fixed costs are adjusted against contribution.
2.2.6. IMPORTANCE (APPLICATIONS/USES):-

1) Easy:

In this method calculation is very easy and understandable. Cost is found is

only considering variable cost is therefore easy.

2) Profit Planning

Another importance application of marginal costing is the area of profit planning.

Profit planning, generally known as budget or plan of operation may be defined as
the planning of future operations to attain a defined profit good

3) Cost control

Fixed cost remains same with production while variable cost can be appropriately
controlled and therefore cost can be control.

4) For Decision making

This technique is very applicable for decision making for managers. It is useful to
select an appropriate choice from various best choices relating to production and
profit of the organization.

(a) Make or Buy:- Some loose parts used in production of a firm, make or buy in
the organization is decided through marginal costing.

(b) Foreign order:- Marginal costing is also useful to either take foreign order for
certain products to the factory or not.

(c) Key Factor:- Marginal costing is also useful to decide how many units of a
certain product to produce where there is a scarcity of either materials or labour
and also machine hours.

(d) Production options:- (Choice) Marginal costing is also applicable to decide to

produce a profitable product out of various production choices.
(e) For Differentiate co:- In the factory from different levels of production, which
volume of production is profitable one is easily decided. Flexible budget about
different units is also prepared with application of marginal costing.

5) In Inflation time :-

In Inflation time, maximum profit can be made by maximum production and

selling. In these circumstances, Marginal costing helps in deciding an actual
level of production at which optimum profit can be earned.

6) In Deflation time :-

In Deflation time, maximum loss may arise. So marginal costing helps in deciding
the actual level of production and selling of products at which no loss assume.

2.3. LITERATURE REVIEW

 Bauer, Daniel, and George Zanjani. "The marginal cost of risk, risk
measures, and capital allocation." Management Science, ISSN: 1431-1457,
Volume 62(5), Year 2016. Financial institutions use risk measures to
calculate the marginal capital cost when expanding the exposure to a
certain risk within their portfolio. We reverse this approach by calculating
the marginal cost based on economic fundamentals for a profit-maximizing
firm and then by identifying the risk measure delivering the correct
marginal cost. The resulting measure depends on context. Whereas familiar
measures can be recovered in some circumstances, other circumstances
yield unfamiliar forms. In all cases, the risk preferences of the institution’s
claimants determine how the correct risk measure must weight various
default states. Our results demonstrate that risk measures used for pricing
and performance measurement should be chosen based on economic
fundamentals and may not necessarily adhere to the mathematical
properties typically imposed in the literature.

 Robert E Hall “MARGINAL COSTING AS AN ESSENTIAL TOOL FOR DECISION

MAKING IN A MANUFACTURING COMPANY FOR DECISION MAKING IN A
 MANUFACTURING COMPANY” National Bureau of Economic Research,
ISSN: 24574, Volume 5(2), May 2018 This report revealed the result of an
investigation into the marginal costing Technique as an essential Tool for
Decision Marking in a manufacturing company, with a particular reference
to the Anambra Motor Manufacturing Company (ANAMMCO), Emene
Enugu.This research offers the researcher the opportunity to study
marginal costing as a tool for decision making as it is practiced in
ANAMMCO.. Read more at:
https://www.grossarchive.com/project/accounting/3378-marginal-costing-
as-an-essential-tool-for-decision-making-in-a-manufacturing-company-for-
decision-making-in-a-manufacturing-companya-case-study-of-anamco-
enugu.

2.4. RESEARCH GAP

“Marginal costing as This study was In this study Identify the

a tool for undertaking to evaluate position of manufacturing
management decision marginal costing company in detail
making” V.K. Saxena& techniques to wards
C.D. Vashist ascertaining its efficiency
and effectiveness. 

A STUDY ON This study is limited to In this research I study To

MARGINAL COSTING the survey of how the examine Profit-volume ratio,
IN SUNDARAM marginal costing Break-even point and Margin
FINANCE AT TRICHY technique is used to of safety of PIPE TECH
Venkatesan D1 , make decision at the HYDRAULIC MANUFACTURING
Stalin2 , Muthuraja Sundaram Finance and COMPANY.
N3 how effective and
efficient it is to the
company. This
investigation is not to be
taken as an exhaustive
piece.

CHAPTER NO 3 COMPANY PROFILE

3.1. INTRODUCTION AND HISTORY

Pipe Tech Hydraulic
Incorporated in the year 2000, Pipe Tech Hydraulic is a
foremost Wholesaler, Distributor and Service Provider engrossed in
offering a wide range of products and services like Brass Fittings,
Lubrication Systems, Pneumatic Fittings, Power Pack, Copper Pipe and SS
Pipes, Hose Pipes, Hydraulic Fitting Parts and Accessories, Hydraulic Valves
and Pumps, Hydraulic Pipe works etc.  The products we offer are designed
and developed with precision; these are made making use of top class basic
inputs along with modern tools and tackles. Known for their applications in
different industrial applications, these offered products are made at the
premises of our suppliers. Also, these are well checked at the premises of
our customers on time. Besides this, the services offered by us are delivered
on time as per the changing needs and necessities of our customers. We
Pipe Tech Hydraulic is one of the leading Distributor of Parker Hydraulic
Hose Pipe.
 
We being a highly reliable organization understand the significance team
plays in the functionality of an entity thus have employed an accomplished
team with us to complete all our administrative goals and objectives within
the promised frame of time. Being highly dedicated and qualified, they
assist us in successfully finishing all our consignments in sole and bulk.
Along with this, their harmonized functioning and competence have
assisted us to retain the status we have mustered in this market. Besides
this, we organize regular training sessions and seminars at our premises so
as to update our crew about the advancements taking place in the industry.
 
Since our inception in this highly competitive industry, we are functioning
efficiently beneath the supervision of our guide Mr. Prakash Akhande. His
immense ability and capability to understand the changing desires has
garnered us vast acknowledgement from our patrons.

Establishment in this industry, they are focused towards maintaining for

ourselves a reputed standing in the industry. With their hard work, they are
almost successful in attaining this objective. Right from the production of
products to their quality testing and final delivery, our offered product range is
made with perfection. Also, our services are delivered with extreme precision.
Not only this, but the rates at which we present our range to our customers,
 flexible modes of payment and our promise of delivering our range on time makes
us a preferred market choice. Some other factors behind the success of our firm
include:
 
 Reasonable rates
 On time delivery
 Huge distribution network
 Customized solutions
 Multiple payment options
 Ethical business strategies
 Clarity in deals

3.2. MISSION AND VISION

MISSION

The vision of Pipe Tech Hydraulic Manufacturing Company. is to continue

the heritage of our Company and be a premier Indian manufacturer of top
quality products. We dedicate ourselves to be the supplier of choice when
our type of products are being sought. This vision will be accomplished by
sharing the responsibilities of planning and decision making with all of our
employees Pipe Tech Hydraulic Manufacturing Company will strive to
maintain the image it has developed over the many months with its
suppliers, employees and community as a company of excellence.

VISION

Pipe Tech Hydraulic Manufacturing Company mission is to produce and

continually develop quality products at a competitive price while fostering a
climate where environmental technologies can thrive. Pipe Tech Hydraulic
Manufacturing Company will always strive to service our customer with the
utmost integrity, and to their complete satisfaction. It is our goal to ensure
our mission by continuous self improvement, growth in our operations and
employees; while maintaining profitability to the benefit of our customers,
employees, and community. All employees will work together in combining
their efforts and skills to ensure our mission and goals are fulfilled in a
courteous manner.
 3.3. PRODUCTS / SERVICES

Regarded as one of the eminent business name, we are betrothed in the

domain of offering to our patrons a pristine grade spectrum of products and
services including External Coatings, Waterproofing and Polymer Coatings,
Concrete Admixture, Concrete AID, Grout and Anchors, Sealants and
Adhesives, Epoxy and Mortar, APP Membrane and Fiber Mesh, Industrial
Flooring and Precast Products etc.

Products

 Hydraulic Fittings

Fluid Level Indicator

Suction Strainer
 Pressure Gauge Connector

 Brass & Pneumatic Fittings

 Power Pack
 Hydraulic Cylinders

3.5. ORGANISATIONAL STRUCTURE

The Pipe Tech Hydraulic Manufacturing Company organizational chart typically

illustrates relations between people within an organization. Such relations might
include managers to sub-workers, directors to managing directors to various
departments, and so forth.
 3.6. SOWT ANALYSIS

Strengths of Pipe Tech Hydraulic Manufacturing Company

 Talent Management
 Rising Returns
 Strong Brand Recognition.
 The Success of New Product Mix
 Associate Partner
 Quality Products.
 Strong Corporation
 Successful in its Market

Weaknesses of Pipe Tech Hydraulic Manufacturing Company

 Declining Market Share.
 Expensive Supply Chain & Logistics Network.
 No More a Monopoly
 Inability to Pivot
 Business Model

Opportunities of Pipe Tech Hydraulic Manufacturing Company

 Increasing Government Regulations
 Customers Migrating to Higher End Products
 Local Collaboration
 Strategic Acquisitions.

Threats to Pipe Tech Hydraulic Manufacturing Company

 Competition
 Government & Environmental Regulations
 Changes in the Prices of Raw Materials & End Products
 Local Distributors
CHAPTER NO 4 DATA ANALYSIS AND INTERPRETATION

4.1. STATISTISCAL ANALYSIS

Income statements (Month wise) of Pipe Tech Hydraulic Manufacturing
Company for the year ended 2021-2022 (Rs. in LAKHS)

A. CALCULATION OF PROFIT VOLUME RATIO by using below formula

P/V Ratio = Contribution / Sales

 P/V Ratio
78.00%
76.00%
74.00%
72.00%
70.00%
percentage

68.00%
66.00%
64.00%
62.00%
60.00%
58.00%
01/04/2021 01/08/2021 TO 01/12/2021 TO 01/01/2022 TO
TO 31/07/2021 30/11/2021 28/02/2022 31/03/2022

01/04/2021 01/08/2021 01/12/2021 01/01/2022

TO TO TO TO
PARTICULARS 31/07/2021 30/11/2021 28/02/2022 31/03/2022

Sales 42,32,500 46,31,500 46,58,653 53,26,450

(-) Variable Cost 11,49,300 16,54,750 14,74,560 12,29,785
Contribution 20,78,775 29,76,750 33,84,093 40,96,665

P/V Ratio 64.43% 64.42% 69.65% 76.91%

(CONTRIBUTION/SALES)
 P/V Ratio
78.00%
76.00%
74.00%
72.00%
70.00%
percentage

68.00%
66.00%
64.00%
62.00%
60.00%
58.00%
01/04/2021 TO 01/08/2021 TO 01/12/2021 TO 01/01/2022 TO
31/07/2021 30/11/2021 28/02/2022 31/03/2022

Analysis:

The PVR (Profit Volume Ratio) of the company for six months (01/04/2021
TO 31/07/2021) 64.43% and then quite decreasing in the months
(01/08/2021 TO 30/11/2021) that are 64.42%. But In accordance with the
months (01/08/2021 TO 30/11/2021) the PVR of the company is 69.65% and
in the months 31st March, 2014 we observe an increase in PVR 01/01/2022
TO 31/03/2022to 66.72%. But, in the months ending 31-3-2015 and 31-3-
2016 the PVR of the company are decreases 62.65% and 62.52% respectively.
And in the months 01/01/2022 TO 31/03/2022 the PVR of the company is
highest 76.91%.

B. CALCULATION OF BREAK EVEN PIONT by using below formula

BEP IN RUPEES = FIXED COST / P/V RATIO

BEP SALES IN % = FIXED COST/CONTRIBUTION

 PARTICULARS 01/04/2021 01/08/2021 01/12/2021 01/01/2022
TO TO TO TO
31/07/2021 30/11/2021 28/02/2022 31/03/2022
Contribution 20,78,775 29,76,750 33,84,093 40,96,665
Fixed Cost 10,50,000 10,50,000 18,35,600 18,35,600
P/V Ratio 64.43% 64.42% 69.65% 76.91%
BEP Sales in Rs. 16,29,675 16,29,928 26,35,463 23,86,685
BEP Sales in % 35.27% 54.25% 44.80%

BEP Sales
60.00%

50.00%

40.00%
Percentage

30.00%

20.00%

10.00%

0.00%
01/04/2021 TO 01/08/2021 TO 01/12/2021 TO 01/01/2022 TO
31/07/2021 30/11/2021 28/02/2022 31/03/2022

Analysis:
The BEP (Break-even Point) in accordance to sales is increasing in first Three
months (01/04/2021 TO 1/07/2021) is 50.51% and BEP is decreasing
for another three months (01/08/2021 TO 30/11/2021) 35.27 %
respectively. But in the months (01/12/2021 TO 28/02/2022) major change
in the BEP is observed to 54.24% And in the Another three months
(01/01/2022 TO 31/03/2022) again it decreases to 44.80%.

C. CALCULATION OF MARGIN OF SAFETY by using below formula

 MARGIN OF SAFETY = TOTAL SALES – BREAK EVEN SALES

01/04/2021 01/08/2021 01/12/2021 01/01/2022

TO TO TO TO
PARTICULARS 31/07/2021 30/11/2021 28/02/2022 31/03/2022

Total Sales 42,32,500 46,31,500 46,58,653 53,26,450

Break Even Sales 16,29,675 16,29,928 26,35,463 23,86,685
Margin of Safety 26,00,000 30,01,575 20,23,190 29,39,765
61.42% 64.48% 43.42% 52.24%

Margin of Safety
70.00%

60.00%

50.00%

40.00%
Percentage

30.00%

20.00%

10.00%

0.00%
01/04/2021 TO 01/08/2021 TO 01/12/2021 TO 01/01/2022 TO
31/07/2021 30/11/2021 28/02/2022 31/03/2022

Analysis:-
A constant fluctuate in Margin of safety is observed from the months
(01/04/2021 TO 1/07/2021) and (01/08/2021 TO 30/11/2021) . A slight
decrease is observed in the month (01/12/2021 TO 28/02/2022) . But again
the Margin of safety tends to increase in the Another three months
(01/01/2022 TO 31/03/2022) by 52.24% and In this months increase in
Margin of safety is measured due to decrease in Break-even point in
accordance to sales.

Findings:-
Though the Margin of safety of the company is found to be fluctuating year
by year, the Profit Volume Ratio is also fluctuating. Hence, it can be said
that the overall position of the company is improving months by months
with the increase in PV Ratio.

Suggestion:-
From the above study company should improve their workings and it
should be try to reduce fixed cost. Company can get more contribution and
high level of PVR to decreasing in variable cost or increasing in sales. On the
other hand, company can also get more profitability to decreasing in fixed
cost.