40+ Marginal Costing MCQ | Cost Accounting MCQs (Free Resource)
Marginal Costing MCQ
1. What distinguishes absorption costing from marginal costing?
(a) Product costs include both prime cost and production overhead
(b) Product costs include both production and non-production costs
(c) Stock valuation includes a share of all production costs
(d) Stock valuation includes a share of all costs
2. The Marginal Cost Statement
(a) shows the gross profit
(b) is sent to the shareholders
(c) shows classification of costs as direct and indirect
(d) can be used to predict future profits at different levels of activity
3. CVP analysis requires costs to be categorized as
(a) fixed or variable
(b) direct or indirect
(c) product or period
(d) standard or actual
4. Contribution equals :
(a) Sales minus cost of sales
(b) Sales minus cost of production
(c) Sales minus variable costs
(d) Sales minus fixed costs
5. Contribution is equal to
(a) Fixed cost + profit
(b) Sales – variable cost
(c) Fixed cost – loss
(d) All the above
6. Which of the following costs is not deducted from sales revenue in computation of contribution?
(a) Direct materials
(b) Direct labour
(c) Fixed factory overheads
(d) Variable selling overheads
7. The selling price per unit less the variable cost per unit is the :
(a) Fixed cost per unit
(b) Gross profit per unit
(c) Operating profit per unit
(d) Contribution per unit
8. If contribution margin increases by Rs 2 per unit, then operating profits will
(a) also increase by Rs 2 per unit
(b) increase by less than Rs 2 per unit
(c) decrease by Rs 2 per unit
(d) cannot say
9. P/V ratio is equal to
(a) Profit/volume
(b) Contribution/sales
(c) Profit/contribution
(d) Profit/sales
10. Profit – volume ratio is improved by reducing
(a) Variable cost
(b) Fixed cost
(c) Both of them
(d) None of them
| Answers: 1)Stock valuation includes a share of all production costs 2)can be used to predict future profits at different levels of activity 3)fixed or variable 4)Sales minus variable costs 5)All the above 6)Fixed factory overheads 7)Contribution per unit 8)also increase by Rs 2 per unit 9)Contribution/sales 10)Variable cost |
11. At the break-even point, which equation will be true.
(a) Variable cost – fixed cost = contribution
(b) Sales = variable cost + fixed cost
(c) Sales – fixed cost = contribution
(d) Sales – contribution = variable cost
12. The break-even points in units is equal to
(a) Fixed cost/PV ratio
(b) Fixed cost x sales/total contribution
(c) Fixed cost/contribution per unit
(d) Fixed cost/total contribution
13. When fixed cost increases, the break-even point
(a) Increases
(b) Decreases
(c) No effect
(d) Can’t say
14. When variable cost decreases, the break-even point
(a) Increases
(b) Decreases
(c) No effect
(d) Can’t say
15. When selling price decreases, the break-even point
(a) Increases
(b) Decreases
(c) No effect
(d) Can’t say
16. When sales increases then break-even point
(a) Increases
(b) Decreases
(c) Remains constant
(d) None of these
17. Which of the following can improve break-even point?
(a) Increase in variable cost
(b) Increase in fixed cost
(c) Increase in sale price
(d) Increase in sales volume
(e) Increase in production volume
18. Which of the following describes the margin of safety?
(a) actual contribution margin achieved compared with that required to break-even
(b) actual sales compared with sales required to break-even
(c) actual versus budgeted net profit margin
(d) actual versus budgeted sales
19. Margin of safety is expressed as
(a) Profit / P/V ratio
(b) (Actual sales – sales at BEP ) / Actual sales
(c) Actual sales – Sales at BEP
(d) All of the above
20. Under which of the following cases the margin of safety decreases?
(a) Reduction in fixed cost
(b) Increase in variable cost
(c) Increase in the level of production or selling price or both
(d) Change in the sales mix in order to increase the contribution
(e) Substitute the existing unprofitable product with the profitable ones
| Answers: 11)Sales = variable cost + fixed cost 12)Fixed cost/contribution per unit 13)Increases 14)Decreases 15)Increases 16)Remains constant 17)Increase in sale price 18)actual sales compared with sales required to break-even 19)All of the above 20)Increase in variable cost |
21. In the break-even chart, the margin of safety point lies
(a) To the left of break-even point”
(b) To the right of break-even point
(c) On break even point
(d) Can’t say
22. Fixed cost is equal to
(a) Break-even sales x Margin of safety
(b) Sales x Margin of safety
(c) Sales x Profit-volume ratio
(d) Profit-volume ratio x Break even sales
23. Which of the following factors is to be multiplied with contribution margin ratio to calculate profit?
(a) Unit contribution margin
(b) Margin of safety
(c) Variable costs per unit
(d) Unit sales price
(e) Change in sales volume
24. In cost-volume-profit analysis, profit is equal to
(a) Sales Revenue x P/V ratio – Fixed Cost
(b) Sales units x contribution per unit – fixed costs
(c) Total contribution – Fixed cost
(d) All the above
25. The sales volume in value required to earn the target profit, the formula is
(a) Target profit / Contribution per unit
(b) (Fixed cost + Target profit) x P/V ratio
(c) (Fixed cost + Target profit) / Contribution on per unit
(d) (Fixed cost + Target profit) / PV ratio
26. There is a reduction in the selling price. This will, other factors remaining same –
(a) increase contribution margin
(b) reduce fixed costs
(c) increase variable costs
(d) reduce operating income
27. There is an increase in advertising expenses. This will, other factors remaining same –
(a) reduce operating income
(b) reduce contribution
(c) decrease selling price
(d) increase variable costs
28. Cost-volume-profit analysis is used Primarily by management :
(a) as a planning tool
(b) for control purposes
(c) to prepare external financial statements
(d) for correct financial results
29. The contribution to sales ratio of a company is 20% and profit is Rs 64,500. If the total sales of the company are Rs 7,80,000, the fixed cost is
(a) Rs 1,56,000
(b) Rs 1,21,500
(c) Rs 1,05,600
(d) Rs 91,500
(e) Rs 90,000
30. The total cost of manufacturing 4,000 units of a product is Rs 4,50,000 which includes fixed costs Rs 2,50,000. If the company desires to produce 5,000 units, then the total cost will be-
(a) Rs 5,27,778
(b) Rs 5,20,000
(c) Rs 5,00,000
(d) Rs 4,95,000
(e) Rs 4,83,500
| Answer: 21)On break even point 22)Profit-volume ratio x Break even sales 23)Margin of safety 24)All the above 25)(Fixed cost + Target profit) / PV ratio 26)reduce operating income 27)reduce operating income 28)as a planning tool 29)Rs 91,500 30)Rs 5,00,000 |
31. The total cost of manufacturing 3,600 units of Product X is Rs 81,000 which includes a variable cost per unit of Rs 15.00. If the company desires to produce 3,850 units, then the total cost would be
(a) Rs 86,625
(b) Rs 84,750
(c) Rs 57,750
(d) Rs 52,250
(e) Rs 50,700
32. P Limited incurs fixed costs of Rs 1,00,000 Per annum. The company manufactures a single product and sells it for Rs 50 per unit. If the contribution to sales ratio is 40%, the break-even sales in units are
(a) 5,000
(b) 6,000
(c) 6,500
(d) 7,000
(e) 7,500
33. A company manufactures a single product with a variable cost per unit of Rs 22. The contribution to sales ratio is 45%. Monthly fixed costs are Rs 1,98,000. What is the breakeven point in units?
(a) 4,950
(b) 9,000
(c) 11,000
(d) 20,000
34. A Ltd. manufactures and sells product ‘B’. The sale price per unit of the product is Rs 35. The company will incur a loss of Rs 5.00 per unit if it sells 4,000 units; but if the volume is raised to 12,000 units, the company will make a profit of ` 4.50 per unit. The break-even point in units is
(a) 5,700
(b) 6,612
(c) 5,250
(d) 6,162
35. The profit-volume ratio and margin of safety ratio are 30% and 40% respectively. If the total sales is Rs 3,00,000, the profit of the firm is
(a) Rs 54,000
(b) Rs 48,000
(c) Rs 36,000
(d) Rs 30,000
(e) Rs 25,000
36. A company manufactures a single product which it sells for Rs 15 per unit. The product has a contribution to sales ratio of 40%. The company’s weekly break-even point is sales of Rs 18,000. What would be the profit in a week when 1,500 units are sold?
(a) Rs 900
(b) Rs 1,800
(c) Rs 2,700
(d) Rs 4,500
37. An organization manufactures a single product. The total cost of making 4,000 units is Rs 20,000 and the total cost of making 20,000 units is Rs 40,000. Within this range of activity the total fixed costs remain unchanged. What is the variable cost per unit of the product?
(a) Rs 0.08
(b) Rs 1.20
(c) Rs 1.25
(d) Rs 2.00
38. 5,400 units of a company’s single product were sold for total revenue of Rs 1,40,400. Fixed costs in the period were Rs and net profit was Rs 11,880. What was the contribution per unit?
(a) Rs 7.30
(b) Rs 9.50
(c) RS 16.50
(d) Rs 18.70
39. Sales are Rs 3,20,000 fixed costs are Rs 80,000 and variable costs are Rs 1,20,000. What is the safety margin?
(a) Rs 18,900
(b) Rs 20,000
(c) Rs 1,92,000
(d) Rs 1,28,000
(e) Rs 1,31,000
40. An organization manufactures a single product that has a variable cost of Rs 36 per unit. The organization’s total weekly fixed costs are ` 81,000 and it has a contribution to sales ratio of 40%. This week it plans to manufacture and sell 5,000 units. What is the organization’s margin of safety in units?
(a) 1,625
(b) 2,750
(c) 3,375
(d) 3,500
| Answer: 31)Rs 84,750 32)5,000 33)11,000 34)6,162 35)Rs 36,000 36)Rs 1,800 37)Rs 1.25 38)Rs 9.50 39)Rs 1,92,000 40)1,625 |
41. An organization’s break-even point is 4,000 units at a sales price of Rs 50 per unit, variable cost of Rs 30 per unit, and total fixed costs of Rs 80,000. If the company sells 500 additional units, by how much will its profit increase?
(a) RS 25,000
(b) Rs 15,000
(c) Rs 12,000
(d) Rs 37,000
(e) Rs 10,000
42. Banta Ltd. manufactures product KDM for the last ten years. The company maintains a margin of safety of 36% with an overall contribution to sales ratio of 35%. If fixed cost is Rs 8.4 lakh, the profit of the company is
(a) Rs 11.400 lakh
(b) Rs 24.000 lakh
(c) Rs 4.725 lakh
(d) Rs 37.500 lakh
(e) Rs 8.644 lakh
43. A company wishes to make a profit of Rs 1,50,000. It has fixed costs of Rs 75,000 with a C/S ratio of 0.75 and a selling price of Rs 10 per unit. How many units would the company need to sell in order to achieve the required level of profit?
(a) 10,000 units
(b) 15,000 units
(c) 22,500 units
(d) 30,000 units
44. A company has a profit-volume ratio of 20%. To maintain the same contribution, by what percentage (%) must sales be increased to offset 10% reduction in selling price?
(a) 10
(b) 20
(c) 100
(d) 50
(e) 80
45. The following data is obtained from the records of Plum Ltd.:
| Particulars | First year (Rs) | Second year (Rs) |
| Sales | 1,28,000 | 1,44,000 |
| Profit | 16,000 | 22,400 |
The break-even sales of the company in rupees is
(a) Rs 1,36,000
(b) Rs 1,30,000
(c) Rs 1,00,000
(d) Rs 88,000
(e) Rs 90,000
| Answer: 41)Rs 10,000 42)Rs 4.725 lakh 43)30,000 units 44)80 45)Rs 88,000 |
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