Marginal Costing MCQs with Answers
Marginal costing is a costing technique that focuses on:
a) Fixed costs only
b) Variable costs only
c) Both fixed and variable costs
d) None of the above
Answer: b) Variable costs only
The contribution margin is calculated by:
a) Subtracting fixed costs from total costs
b) Subtracting variable costs from total sales
c) Adding fixed costs to total sales
d) Adding variable costs to total sales
Answer: b) Subtracting variable costs from total sales
Marginal costing is particularly useful for:
a) Long-term decision making
b) Short-term decision making
c) Routine cost control
d) Both a) and b)
Answer: b) Short-term decision making
In marginal costing, fixed costs are treated as:
a) Period costs
b) Product costs
c) Avoidable costs
d) Variable costs
Answer: a) Period costs
Marginal Costing MCQs with Answers
The break-even point is the level of sales at which:
a) Total costs equal total sales
b) Total variable costs equal total sales
c) Total fixed costs equal total sales
d) Total contribution margin equals zero
Answer: a) Total costs equal total sales
Marginal costing assumes that:
a) All costs are fixed
b) All costs are variable
c) Costs can be categorized as fixed and variable
d) Costs are irrelevant for decision making
Answer: c) Costs can be categorized as fixed and variable
Which of the following is an advantage of marginal costing?
a) It provides accurate product costs
b) It helps in long-term strategic planning
c) It simplifies cost-volume-profit analysis
d) It considers all costs in decision making
Answer: c) It simplifies cost-volume-profit analysis
The contribution margin ratio is calculated by:
a) Dividing total contribution margin by total sales
b) Dividing total sales by total contribution margin
c) Dividing fixed costs by total sales
d) Dividing variable costs by total sales
Answer: a) Dividing total contribution margin by total sales
Marginal Costing MCQs with Answers
In marginal costing, the profit is calculated as:
a) Total sales minus total variable costs
b) Total sales minus total costs
c) Total sales minus total fixed costs
d) Total contribution margin minus total fixed costs
Answer: d) Total contribution margin minus total fixed costs
Which of the following costs are not considered in marginal costing?
a) Direct materials
b) Direct labor
c) Variable overhead
d) Fixed overhead
Answer: d) Fixed overhead
Which of the following statements is true regarding marginal costing?
a) It is based on the absorption of fixed costs
b) It ignores fixed costs in decision making
c) It considers fixed costs as variable costs
d) It is primarily used for financial reporting purposes
Answer: b) It ignores fixed costs in decision making
Marginal Costing MCQs with Answers
Marginal costing is most suitable for industries with:
a) High fixed costs and low variable costs
b) High variable costs and low fixed costs
c) Equal proportions of fixed and variable costs
d) No fixed costs or variable costs
Answer: b) High variable costs and low fixed costs
The main purpose of using marginal costing for decision making is to:
a) Maximize fixed costs
b) Minimize variable costs
c) Maximize contribution margin
d) Minimize profit
Answer: c) Maximize contribution margin
In marginal costing, the marginal cost per unit is calculated by dividing:
a) Total fixed costs by the number of units produced
b) Total variable costs by the number of units produced
c) Total costs by the number of units produced
d) Total sales by the number of units produced
Answer: b) Total variable costs by the number of units produced
The breakeven point can be calculated by dividing:
a) Total fixed costs by the contribution margin per unit
b) Total variable costs by the contribution margin per unit
c) Total costs by the contribution margin per unit
d) Total sales by the contribution margin per unit
Answer: a) Total fixed costs by the contribution margin per unit
Marginal Costing MCQs with Answers
Marginal costing assumes that:
a) Fixed costs remain constant at all levels of activity
b) Variable costs vary proportionately with activity levels
c) Both fixed and variable costs remain constant
d) Costs are irrelevant for decision making
Answer: b) Variable costs vary proportionately with activity levels
The contribution margin ratio is calculated by dividing the contribution margin by:
a) Total fixed costs
b) Total variable costs
c) Total sales
d) Total units produced
Answer: c) Total sales
Which of the following costs is considered a direct cost in marginal costing?
a) Indirect labor
b) Fixed overhead
c) Variable selling expenses
d) Direct materials
Answer: d) Direct materials
Marginal costing can be used to determine the profitability of:
a) Each product or service
b) Only fixed costs
c) Long-term investments
d) None of the above
Answer: a) Each product or service
Marginal Costing MCQs with Answers
The concept of “contribution” in marginal costing refers to:
a) The profit generated by each unit sold
b) The total sales revenue
c) The total costs incurred
d) The difference between sales and variable costs
Answer: d) The difference between sales and variable costs
Marginal costing is also known as:
a) Variable costing
b) Absorption costing
c) Standard costing
d) Activity-based costing
Answer: a) Variable costing
The contribution margin per unit is calculated by subtracting:
a) Total fixed costs from total sales
b) Total variable costs from total sales
c) Total sales from total variable costs
d) Total sales from total fixed costs
Answer: b) Total variable costs from total sales
Which of the following costs is classified as a variable cost in marginal costing?
a) Rent for the production facility
b) Direct labor
c) Advertising expenses
d) Salary of the CEO
Answer: b) Direct labor
Marginal Costing MCQs with Answers
In marginal costing, the difference between actual sales and the breakeven point is referred to as:
a) Profit margin
b) Contribution margin
c) Margin of safety
d) Operating margin
Answer: c) Margin of safety
The term “marginal” in marginal costing refers to:
a) The small incremental changes in costs
b) The variable costs per unit
c) The impact on profit of each additional unit sold
d) The difference between fixed and variable costs
Answer: c) The impact on profit of each additional unit sold
Marginal costing is primarily used for:
a) External financial reporting
b) Internal management decision making
c) Tax planning purposes
d) Auditing purposes
Answer: b) Internal management decision making
Which of the following statements is true regarding marginal costing?
a) It is only applicable to manufacturing companies
b) It ignores inventory valuation
c) It considers all costs as fixed costs
d) It is the same as absorption costing
Answer: b) It ignores inventory valuation
Marginal Costing MCQs with Answers
The contribution margin ratio indicates:
a) The proportion of fixed costs to total costs
b) The proportion of variable costs to total costs
c) The proportion of sales revenue to total costs
d) The proportion of profit to total costs
Answer: c) The proportion of sales revenue to total costs
The profit-volume ratio represents:
a) The profit per unit sold
b) The percentage of profit in total sales
c) The relationship between profit and sales volume
d) The profit margin per unit
Answer: c) The relationship between profit and sales volume
Which of the following costs is not considered in marginal costing?
a) Variable production overhead
b) Direct materials
c) Variable selling and distribution costs
d) Fixed administrative expenses
Answer: d) Fixed administrative expenses