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Three key learning points from Marginal costing

Identify three key learning points with respect to the application of concepts like fixed costs, variable costs, contribution margin, breakeven analysis, indifference point, and operating leverage to an organization's overall financial performance.

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The three key learning points are :

1. Break-even analysis is a device for determining the point at which sales will just cover total costs.
or the break even point for a product is the point where total revenue received equals total costs (TR=TC). A break even point is typically calculated in order to determine if it would be worthwhile to sell a proposed product, or to try to figure out whether an existing product can be made profitable.If a firm's costs were all variable, the problem of break-even volume would never arise. By having some variable and some fixed costs, the firm must suffer losses up to a given volume.

Useful in decision making
This figure can be used to make advantageous decisions concerning rates, prices, effect on operating costs and profits. Break-even analysis is especially useful when considering volume and plant expansion. If the firm is to avoid ...

Solution Summary

This explains the three key learning points of marginal costing