Marginal Costing Part I

20 Questions | Total Attempts: 435

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Sales Quizzes & Trivia

Marginal Costing


Questions and Answers
  • 1. 
    Existing sales are Rs.1,00,000 (500 units), variable costs are Rs. 60000 ,fixed costs are Rs. 24000 . If selling price is reduced by 10%which of the following is the break- even  sales quantity
    • A. 

      450 units

    • B. 

      500 units

    • C. 

      400 units

    • D. 

      334 units

  • 2. 
    An increase in fixed costs will result in which of the following?
    • A. 

      A decrease in the contribution: sales ratio

    • B. 

      A decrease in the contribution per units

    • C. 

      An increase in the break-even point sales level

    • D. 

      An increase in the margin of safety

  • 3. 
    Product A has a contribution: sales ratio of  0.50. Product B has a contribution: sales ratio of 0.40. At present, 100 units of each product are sold. If total sales units remain at the present level but an extra 20 units of B are substituted for 20 units of A, which of the following is true of the overall position?
    • A. 

      CS ratio remains unchanged

    • B. 

      CS ratio rises from 0.45 to 0.50

    • C. 

      CS ratio rises from 0.45 to 0.46

    • D. 

      CS ratio fall from 0.45 to 0.44

  • 4. 
    Which of the following statements summarises the recommendation of  SSAP 9 as to the normal treatment of overheads cost for finished goods stock valuation ?
    • A. 

      Include only variable production overheads.

    • B. 

      Include a share of all production overheads.

    • C. 

      Include a share of variable overheads ( production and non- production )

    • D. 

      Include a share of all production and non- production overheads

  • 5. 
    Which of the following statements may be used as the basis of the valuation of work-in-progress in order to conform with the recommendations of SSAP 9?
    • A. 

      Include variable production and variable non- production overheads

    • B. 

      Include expenditure incurred in bringing the stock of its present location and condition.

    • C. 

      Include variable production overheads costs plus direct product costs only.

    • D. 

      Include prime costs only.

  • 6. 
    Adherents of marginal costing as the basis of stock valuation argue that it is relevant for which of the following reasons?
    • A. 

      It enables profit statement to focus on contribution earned from sales.

    • B. 

      It includes variable administration, selling and distribution costs in stock value.

    • C. 

      It excludes non- production costs from stock value.

    • D. 

      It includes fixed production overheads in stock value.

  • 7. 
    Where sales and production are the same quantity, the profit reported where marginal costing is applied will be:
    • A. 

      Greater than that where absorption costing is applied

    • B. 

      Lower than that where absorption costing is applied.

    • C. 

      The same as that where absorption costing is applied.

    • D. 

      Greater, lower or the same as that where absorption costing is applied

  • 8. 
    Which of the following is true when sales units remains constants each month but production units fluctuate?
    • A. 

      Profit reported each month always fluctuate in proportion to units produced

    • B. 

      Absorption cost stock valuation will lead to a higher profit being reported where sales exceed production

    • C. 

      Marginal cost stock valuation will give a higher profit where sales exceed production

    • D. 

      Marginal cost stock valuation will result in the same profit being reported each month

  • 9. 
    Selling price per unit and variable cost per unit are Rs.8 and Rs.5 respectively; fixed production overhead for June is Rs.900; units produced and sold are 600 units and 450 units respectively; nil stock was held at the beginning of the June. Which of the following is the difference in production margin reported for June under absorption costing as compared to that under marginal costing?
    • A. 

      Rs.450 higher under absorption costing

    • B. 

      Rs.150 higher under absorption costing

    • C. 

      Rs.225 higher under absorption costing

    • D. 

      Rs.300 higher under absorption costing

  • 10. 
    Where opening stock of 50 units of finished goods are valued at Rs.10 each and the average unit cost of 500 units produced during the period is Rs.8.90, which method of stock valuation gives a closing stock value of Rs.9 per units?
    • A. 

      FIFO

    • B. 

      Weighted average

    • C. 

      Absorption cost based on normal activity

    • D. 

      Marginal cost

  • 11. 
    An increase of Rs.1000 in fixed selling overheads will affect the net profit reported under marginal and absorption cost method as follows
    • A. 

      Decrease net profit only where absorption costing is used

    • B. 

      Decrease net profit only where marginal costing is used

    • C. 

      Decrease net profit equally in both absorption and marginal costing

    • D. 

      Leave net profit unchanged in both cases.

  • 12. 
    The total production cost for making 20,000 and Rs.21,000 and the total production cost of making 50,000 was Rs.34,000. Once production exceeds 25,000 units, additional fixed cost of Rs.4,000 are incurred. The full production cost per unit for making 30,000 unit is
    • A. 

      Rs 0.30

    • B. 

      Rs.0.68

    • C. 

      Rs.0.84

    • D. 

      Rs.0.93

  • 13. 
    Net profit under absorption costing may differ from net profit determined under direct costing. Is the difference calculated as:
    • A. 

      The quantity of all units in inventory times the relevant fixed cost per unit?

    • B. 

      The quantity of all units in the inventory times relevant variable cost per unit?

    • C. 

      The quantity of all units produced times the relevant fixed cost per units?

    • D. 

      The quantity of all units produced times the relevant variable cost per units?

  • 14. 
    Absorption costing is differ from direct costing in the
    • A. 

      Fact that standard cost can be used with absorption costing but not with direct costing.

    • B. 

      Amount of cost assigned to individual unit of product.

    • C. 

      Kinds of activities for which each can used to report .

    • D. 

      Amount of fixed cost that will be incurred.

  • 15. 
    Income computed by the absorption costing method will tend to exceed income computed by the direct costing method if
    • A. 

      Units produced exceed units sold

    • B. 

      Fixed manufacturing costs decrease

    • C. 

      Variable manufacturing costs decrease

    • D. 

      Units sold exceed units produced

  • 16. 
    What is the term that means that all manufacturing cost (direct and indirect, variable and fixed) which contribute to the production of the product are traced to output and inventories ?
    • A. 

      Job order costing

    • B. 

      Process costing

    • C. 

      Full or absorption costing

    • D. 

      Variable costing

  • 17. 
    A basic cost accounting method in which fixed factory overhead is added to inventory is
    • A. 

      Absorption costing

    • B. 

      Direct costing

    • C. 

      Variable costing

    • D. 

      Process costing

  • 18. 
    Reporting under the direct costing concept is accomplished by
    • A. 

      Including only direct costs in the income statement

    • B. 

      Eliminating the work in process inventory account

    • C. 

      Matching variable cost against revenues and treating fixed cost as period cost

    • D. 

      Treating all cost as period costs

  • 19. 
    Which of the following is a more descriptive term for the type of cost accounting often called direct costing
    • A. 

      Out of pocket costing

    • B. 

      Variable costing

    • C. 

      Relevant costing

    • D. 

      Prime costing

  • 20. 
    Product cost under direct costing included
    • A. 

      Prime costs only.

    • B. 

      Prime costs and variable factory overheads.

    • C. 

      Prime costs fixed factory overheads

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