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Q1. Which costing method is best for short-term decision-making?
Solution:
Marginal costing is best for short-term decision-making as it focuses on variable costs and contribution margin.
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Q2. In marginal costing, which costs are considered relevant for decision-making?
Solution:
Marginal costing considers only incremental costs, which are relevant for decision-making regarding pricing and production.
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Q3. Which of the following costs would be classified as a mixed cost?
Solution:
A mixed cost has both fixed and variable components, such as an electricity bill.
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Q4. If a company budgeted $200,000 for direct materials but actually spent $220,000, what is the direct materials variance?
Solution:
Direct Materials Variance = Actual Cost - Budgeted Cost = $220,000 - $200,000 = $20,000 (Unfavorable)
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Q5. What is the primary difference between direct and indirect costs?
Solution:
The primary difference is that direct costs can be traced directly to a specific cost object, while indirect costs cannot.
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Q6. What is the break-even point in sales dollars if the break-even point in units is 1,000 and the selling price per unit is $25?
Solution:
Break-even Sales = Break-even Units * Selling Price per Unit = 1,000 * $25 = $25,000.
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Q7. What is the primary difference between fixed and variable budgets?
Solution:
Variable budgets change with activity levels, while fixed budgets remain constant regardless of activity levels.
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Q8. What type of cost is directly associated with the production of a specific product?
Solution:
Variable costs change with the level of production and are directly tied to the manufacturing of a product.
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Q9. What is the contribution margin in marginal costing?
Solution:
The contribution margin is calculated as Sales Revenue minus Variable Costs.
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Q10. 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?
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.
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