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Marginal Costing MCQ

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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

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