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CONTRIBUTION: It is the variation between the marginal cost of sales and sales and it contributes towards fixed profit and expenses. It is differ from the profit which is the net gain in activity or the extra and remains after deducting fixed expenses from the entire contribution. In marginal costing, the idea of contribution is very essential as it helps to observe the profitability of a product, department or division, to have a better product mix, for maximize the profits and profit planning to of a concern.
Contribution = Sales - Variable cost (or) Fixed cost +Profit (or) Fixed cost - Loss
exercise solution
how variable cost help in decision making.with suitable example
Limitations of Marginal Costing
Contract Costing It is a form of exact order costing, which is applied to relatively large cost units that normally get a considerable length of time to complete as an example
initial stock.=21,926,150 purchases.=361,550,000 other expenses=207,000,000 operatig profit=34,500,000 sqles=600,000,000 disc received=23,976,150 final stock=1000,000 variable exp
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