Understanding "Marginal Costing Basics - Applications" is crucial for students preparing for exams. This topic not only enhances your conceptual clarity but also equips you with the skills to tackle MCQs effectively. Practicing objective questions related to marginal costing can significantly improve your exam scores, making it an essential part of your study routine.
What You Will Practise Here
Definition and significance of marginal costing
Key concepts: fixed costs, variable costs, and contribution margin
Applications of marginal costing in decision-making
Break-even analysis and its importance
Cost-volume-profit analysis
Relevant costing for pricing decisions
Comparison of marginal costing with absorption costing
Exam Relevance
The topic of marginal costing is frequently featured in CBSE, State Boards, and various competitive exams like NEET and JEE. Students can expect questions that assess their understanding of key concepts, applications, and calculations related to marginal costing. Common question patterns include numerical problems, theoretical explanations, and scenario-based questions that require application of concepts.
Common Mistakes Students Make
Confusing fixed costs with variable costs
Misunderstanding the concept of contribution margin
Errors in calculating break-even points
Neglecting to consider relevant costs in decision-making scenarios
Overlooking the differences between marginal costing and absorption costing
FAQs
Question: What is marginal costing? Answer: Marginal costing is a costing technique that considers only variable costs for decision-making, helping businesses understand the impact of production levels on profitability.
Question: How does marginal costing aid in decision-making? Answer: It provides insights into cost behavior, enabling managers to make informed decisions regarding pricing, production levels, and product mix.
Now is the time to enhance your understanding of "Marginal Costing Basics - Applications". Dive into our practice MCQs and test your knowledge to excel in your exams!
Q. A company has a selling price of $300, variable costs of $180, and fixed costs of $60,000. What is the break-even sales revenue?
A.
$120,000
B.
$100,000
C.
$80,000
D.
$60,000
Solution
Break-even sales revenue = Break-even units * Selling Price. Break-even units = Fixed Costs / Contribution Margin per Unit = $60,000 / ($300 - $180) = 600 units. Break-even sales revenue = 600 * $300 = $180,000.
Q. If a company has a contribution margin of $30 per unit and fixed costs of $12,000, how many units must be sold to achieve a target profit of $3,000?
