Marginal Costing & Break-even analysis

Marginal cost

Marginal cost is termed  as the amount of any given volume of output by that aggregate costs are changed, if the volume of output is raised or decreased by one unit.

Example: If the net  total costs of producing 10 units is $550, & for 11 units is $600, the marginal cost of producing the 11th unit is $50($600-$550).

Marginal cost is otherwise termed as incremental cost,  differential cost, extra cost,  variable cost or direct cost. Break-even Point

Break-even point is that point at where there is neither profit nor loss. This is at point costs are equal to sales. It is otherwise known as balancing point, neutral point, loss ending point, profit beginning point, equilibrium point, etc. After BEP is achieved, all the further sales will share to profit.

At BEP, Sales - Variable cost = Fixed costs. Or you can say Contribution = Fixed costs.

Define Break-even analysis

Break-even analysis is an analytical technique which is used to denote the probable profit at any level of production. It is principally an extension of marginal costing.