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AVIJIT ROYCHOUDHURY
INSPECTOR OF COLLEGES
VIDYASAGAR UNIVERSITY
Marginal costing is an extremely valuable technique in the
hands of the management. The cost-volume-profit
relationship has proved to be a key to plethora of solutions to
many situations faced by the management.
In normal circumstances.
In a monopoly market :
₹7,50,000 + ₹1,50,000
𝑆𝑒𝑙𝑙𝑖𝑛𝑔 𝑃𝑟𝑖𝑐𝑒 = = ₹120
7,500 𝑢𝑛𝑖𝑡𝑠
₹3,45,000
𝐶𝑜𝑠𝑡 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡 = = ₹11.50
30,000
Even though the selling price of ₹10 is below the total cost, it
is above the marginal cost of ₹8, hence it is beneficial to sell
the product at the selling price of ₹10, to reduce the loss on
account of fixed expenses (if the product is discontinued) by
₹40,000 as shown below:
From the above analysis it is clear that the offer for export
should be accepted as it delivers excess profit of ₹9,600.