The name is changed but not the character.
It changes the name but remains the same character. Know what? A girl is born into a family and is adopted by another family owing to marriage. She has a different name in the new house in some cases but maintains the same character and conducts herself as she inherited from her original family to the new one. Such a change only she can try, but not he. She is always bigger in everything than he is, in loving, managing things in life.
What is the connection of the above to the learning of finance? Yes. We do have in marginal costing a term called Contribution. This is referred to as Contribution until it recovers the fixed cost, but its name is changed to Profit. For the Profit Volume Ratio, the formula is Contribution/Sales or Change in Profit/Change in Sales.
See the connection in the numerator: what is referred to in the first case is Contribution and in the second case is Profit. In fact, one can say profit is the remainder of contribution over fixed cost. The character remains the same but not the name. Connected?!!!
By CA L.Muralidharan and CPA L.Mukundan
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