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Marginal Costing Basics - Advanced Concepts

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Marginal Costing Basics - Advanced Concepts MCQ & Objective Questions

Understanding "Marginal Costing Basics - Advanced Concepts" is crucial for students preparing for school and competitive exams. This topic not only enhances your conceptual clarity but also equips you with the skills to tackle various MCQs and objective questions effectively. Practicing these important questions will significantly improve your exam performance and boost your confidence.

What You Will Practise Here

  • Definition and significance of marginal costing
  • Key concepts such as contribution margin and break-even point
  • Formulas for calculating marginal cost and total cost
  • Understanding fixed and variable costs
  • Application of marginal costing in decision-making
  • Cost-volume-profit analysis
  • Real-world examples and case studies

Exam Relevance

The topic of marginal costing is frequently featured in CBSE, State Boards, and competitive exams like NEET and JEE. Students can expect questions that test their understanding of key concepts, calculations involving marginal costs, and application-based scenarios. Common question patterns include numerical problems, theoretical explanations, and case studies that require critical thinking.

Common Mistakes Students Make

  • Confusing fixed costs with variable costs, leading to incorrect calculations.
  • Misunderstanding the contribution margin and its implications.
  • Neglecting to apply the break-even analysis correctly in problem-solving.
  • Overlooking the importance of assumptions made in marginal costing.
  • Failing to interpret the results of marginal costing in real-world scenarios.

FAQs

Question: What is marginal costing?
Answer: Marginal costing is a costing technique that considers only variable costs for decision-making, helping businesses determine the impact of production levels on profitability.

Question: How does marginal costing help in decision-making?
Answer: It aids in analyzing the profitability of products, setting selling prices, and making decisions regarding product discontinuation or expansion.

Now is the time to enhance your understanding of "Marginal Costing Basics - Advanced Concepts". Dive into our practice MCQs and test your knowledge to excel in your exams!

Q. If a company has a contribution margin of $15 per unit and sells 2,000 units, what is the total contribution?
  • A. $30,000
  • B. $15,000
  • C. $45,000
  • D. $60,000
Q. If a company has a sales price of $50, variable costs of $30, and fixed costs of $100,000, what is the contribution margin ratio?
  • A. 40%
  • B. 20%
  • C. 30%
  • D. 50%
Q. If a company has fixed costs of $60,000 and a contribution margin ratio of 40%, what is the sales required to break even?
  • A. $150,000
  • B. $100,000
  • C. $75,000
  • D. $200,000
Q. If a company sells 1,000 units at $50 each and has variable costs of $30 per unit, what is the total contribution?
  • A. $20,000
  • B. $30,000
  • C. $50,000
  • D. $10,000
Q. If a product has a selling price of $100, variable costs of $60, and fixed costs of $10, what is the break-even point in sales dollars?
  • A. $1000
  • B. $2000
  • C. $5000
  • D. $3000
Q. In a CVP analysis, which of the following factors is NOT considered?
  • A. Selling price per unit
  • B. Variable cost per unit
  • C. Total fixed costs
  • D. Market demand
Q. In a flexible budget, what remains constant?
  • A. Variable costs per unit
  • B. Total fixed costs
  • C. Total variable costs
  • D. Sales price per unit
Q. In marginal costing, fixed costs are treated as:
  • A. Product costs
  • B. Period costs
  • C. Variable costs
  • D. Direct costs
Q. What is the break-even point in units if fixed costs are $40,000, selling price per unit is $80, and variable cost per unit is $50?
  • A. 800 units
  • B. 1,000 units
  • C. 1,200 units
  • D. 600 units
Q. What is the contribution margin in marginal costing?
  • A. Sales Revenue - Variable Costs
  • B. Sales Revenue - Fixed Costs
  • C. Total Costs - Profit
  • D. Sales Revenue - Total Costs
Q. What is the formula for calculating the margin of safety?
  • A. Actual Sales - Break-even Sales
  • B. Break-even Sales - Actual Sales
  • C. Total Sales - Variable Costs
  • D. Fixed Costs / Contribution Margin
Q. What is the margin of safety if the break-even sales are $100,000 and actual sales are $150,000?
  • A. $50,000
  • B. $100,000
  • C. $150,000
  • D. $200,000
Q. What is the primary purpose of cost control?
  • A. To increase sales
  • B. To reduce fixed costs
  • C. To ensure that actual costs do not exceed budgeted costs
  • D. To maximize profit
Q. Which costing method is primarily used for internal decision-making?
  • A. Absorption costing
  • B. Marginal costing
  • C. Standard costing
  • D. Job costing
Q. Which of the following is a key benefit of using marginal costing?
  • A. It provides a detailed analysis of fixed costs.
  • B. It simplifies the decision-making process.
  • C. It is required by GAAP.
  • D. It allocates fixed costs to products.
Q. Which of the following is NOT a characteristic of marginal costing?
  • A. Focus on variable costs
  • B. Contribution margin analysis
  • C. Absorption of fixed costs into product costs
  • D. Useful for decision making
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