Question 1

Marginal costing is appropriate for the valuation of closing inventory in financial accounting

Accepted Answer

A) True 
 B)False  False

Question 2

The MoneyTalks company produces and sells 125,000 units a year for £50 each.Variable costs are £40 and annual fixed costs are £600,000.
Calculate the contribution per unit.

Accepted Answer

A)  £90 
B)  £10 
C)  £4.80 
D)  £14.80 
A)  £90 
B)  £10 
C)  £4.80 
D)  £14.80 B

Question 3

Which of the following statements is false?

Accepted Answer

A)  One of the limitations of marginal costing is that it is difficult to assess profitability when there are limiting factors such as machine capacity 
B)  Marginal costing can identify the minimum selling price that would not produce a loss 
C)  Marginal costing focuses on how costs will behave as a result of changes in the volume of production 
D)  Marginal costing focuses on the contribution each product can make towards fixed costs and towards profit 
A)  One of the limitations of marginal costing is that it is difficult to assess profitability when there are limiting factors such as machine capacity 
B)  Marginal costing can identify the minimum selling price that would not produce a loss 
C)  Marginal costing focuses on how costs will behave as a result of changes in the volume of production 
D)  Marginal costing focuses on the contribution each product can make towards fixed costs and towards profit A

Question 4

In practice,direct material costs per unit might decrease as output increases because of:

Accepted Answer

A)  Economies of bulk buying 
B)  Employees become more efficient at their job 
C)  Increased manufacturing capacity 
D)  All of the above 
A)  Economies of bulk buying 
B)  Employees become more efficient at their job 
C)  Increased manufacturing capacity 
D)  All of the above

Question 5

"Contribution" can be defined as sales minus variable costs

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is not an assumption associated with marginal costing and break-even analysis?

Accepted Answer

A)  In marginal costing and break-even analysis it is assumed that cost behaviour is linear 
B)  In marginal costing and break-even analysis it is assumed that not all costs can be classified as fixed or variable 
C)  In marginal costing and break-even analysis it is assumed that variable costs per unit remain constant 
D)  In marginal costing and break-even analysis it is assumed that fixed costs remain constant 
A)  In marginal costing and break-even analysis it is assumed that cost behaviour is linear 
B)  In marginal costing and break-even analysis it is assumed that not all costs can be classified as fixed or variable 
C)  In marginal costing and break-even analysis it is assumed that variable costs per unit remain constant 
D)  In marginal costing and break-even analysis it is assumed that fixed costs remain constant

Question 7

The break-even point can be expressed as:

Accepted Answer

A)  Fixed costs/contribution per unit 
B)  Fixed costs-variable costs/contribution 
C)  Fixed costs - variable costs 
D)  Contribution/fixed costs 
A)  Fixed costs/contribution per unit 
B)  Fixed costs-variable costs/contribution 
C)  Fixed costs - variable costs 
D)  Contribution/fixed costs

Question 8

The MoneyTalks company produces and sells 125,000 units a year for £50 each.Variable costs are £40 and annual fixed costs are £600,000.
Calculate the contribution per unit.

Accepted Answer

A)  £90 
B)  £10 
C)  £4.80 
D)  £14.80 
A)  £90 
B)  £10 
C)  £4.80 
D)  £14.80

Question 9

"Contribution" is defined as:

Accepted Answer

A)  The amount of profit a product generates 
B)  The fixed costs that are incurred regardless of the volume of product made 
C)  The variable costs of a product 
D)  Selling Price - Direct Costs 
A)  The amount of profit a product generates 
B)  The fixed costs that are incurred regardless of the volume of product made 
C)  The variable costs of a product 
D)  Selling Price - Direct Costs

Question 10

Marginal costing information can only be presented for business as a whole and not for each product

Accepted Answer

A) True 
 B)False

Question 11

The "Break Even" point for a manufacturing company is defined as:

Accepted Answer

A)  The point where the company incurs the same amount of fixed and variable expenses 
B)  The point where gross profit and net profit are the same 
C)  The volume of sales where a company makes neither a profit nor a loss 
D)  The volume of sales that generate the same fixed costs as revenue 
A)  The point where the company incurs the same amount of fixed and variable expenses 
B)  The point where gross profit and net profit are the same 
C)  The volume of sales where a company makes neither a profit nor a loss 
D)  The volume of sales that generate the same fixed costs as revenue

Question 12

The MoneyTalks company produces and sells 125,000 units a year for £50 each.Variable costs are £40 and annual fixed costs are £600,000.
Calculate the break-even point in sales revenue.

Accepted Answer

A)  £266,666 
B)  £26,666 
C)  £2,400,000 
D)  £21,818 
A)  £266,666 
B)  £26,666 
C)  £2,400,000 
D)  £21,818

Question 13

Before contribution can be calculated,fixed costs and variable costs have to be separated

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is NOT a limitation of marginal Costing?

Accepted Answer

A)  It is not acceptable for valuing inventory 
B)  It ignores fixed costs which still have to be paid 
C)  Over long periods of time, fixed costs are not fixed. And variable costs may not be directly variable with production 
D)  It allows the calculation of contribution 
A)  It is not acceptable for valuing inventory 
B)  It ignores fixed costs which still have to be paid 
C)  Over long periods of time, fixed costs are not fixed. And variable costs may not be directly variable with production 
D)  It allows the calculation of contribution

Question 15

The KMuir company is planning to sell a new product which they will sell for £55 each.Fixed costs are £35,000 per annum; variable costs are £35 per unit.How much do they need to sell to break-even?

Accepted Answer

A)  125 units 
B)  637 units 
C)  1,000 units 
D)  1,750 units 
A)  125 units 
B)  637 units 
C)  1,000 units 
D)  1,750 units

Question 16

The results of AB/CB company are as follows:
$$\begin{array} { l c c } 
\text { Sales } & 15,000 \text { units at } £ 45 \text { each } & 675,000 \
\text { Variable costs at } & £ 37.50 \text { each } & 562,500 \
\text { Fixed costs } & & 67,500 \
\text { Profit } & & 45,000
\end{array}$$
How many more units do they need to sell to make a profit of £75,000?

Accepted Answer

A)  90 units 
B)  667 units 
C)  1467 units 
D)  4000 units 
A)  90 units 
B)  667 units 
C)  1467 units 
D)  4000 units

Question 17

The break-even point can be expressed as:

Accepted Answer

A)  Sales/fixed costs-contribution 
B)  Fixed costs/(contribution per unit/sales per unit) 
C)  Fixed cost/sales 
D)  Fixed costs-contribution/sales 
A)  Sales/fixed costs-contribution 
B)  Fixed costs/(contribution per unit/sales per unit) 
C)  Fixed cost/sales 
D)  Fixed costs-contribution/sales

Question 18

In measuring the previous relationship between costs,detailed mathematical accuracy is more important than "realistic assumptions"

Accepted Answer

A) True 
 B)False

Question 19

Which of the statements is correct?

Accepted Answer

A)  In the short term direct labour costs may be more like fixed costs 
B)  In the long run most fixed costs behave more like variable costs 
C)  If production is to increase above existing production capacity , then fixed costs will have to increase 
D)  All of the above statements are correct 
A)  In the short term direct labour costs may be more like fixed costs 
B)  In the long run most fixed costs behave more like variable costs 
C)  If production is to increase above existing production capacity , then fixed costs will have to increase 
D)  All of the above statements are correct

Question 20

Spellbound company make a sell 500,000 "wandies" a year for £15 each.Fixed costs are £350,000 a year and variable costs are £12 per unit.
By how much can the existing level of sales fall before the company starts to make a loss?

Accepted Answer

A)  £5,750,000 
B)  £7,150,000 
C)  £1,150,000 
D)  £1,750,000 
A)  £5,750,000 
B)  £7,150,000 
C)  £1,150,000 
D)  £1,750,000

Marginal costing is appropriate for the valuation of closing inventory in financial accounting

The MoneyTalks company produces and sells 125,000 units a year for £50 each.Variable costs are £40 and annual fixed costs are £600,000. Calculate the contribution per unit.

Which of the following statements is false?

In practice,direct material costs per unit might decrease as output increases because of:

"Contribution" can be defined as sales minus variable costs

Which of the following is not an assumption associated with marginal costing and break-even analysis?

The break-even point can be expressed as:

The MoneyTalks company produces and sells 125,000 units a year for £50 each.Variable costs are £40 and annual fixed costs are £600,000. Calculate the contribution per unit.

"Contribution" is defined as:

Marginal costing information can only be presented for business as a whole and not for each product

The "Break Even" point for a manufacturing company is defined as:

The MoneyTalks company produces and sells 125,000 units a year for £50 each.Variable costs are £40 and annual fixed costs are £600,000. Calculate the break-even point in sales revenue.

Before contribution can be calculated,fixed costs and variable costs have to be separated

Which of the following is NOT a limitation of marginal Costing?

The KMuir company is planning to sell a new product which they will sell for £55 each.Fixed costs are £35,000 per annum; variable costs are £35 per unit.How much do they need to sell to break-even?

The results of AB/CB company are as follows: Sales 15,000 units at £45 each 675,000 Variable costs at £37.50 each 562,500 Fixed costs 67,500 Profit 45,000 How many more units do they need to sell to make a profit of £75,000?

The break-even point can be expressed as:

In measuring the previous relationship between costs,detailed mathematical accuracy is more important than "realistic assumptions"

Which of the statements is correct?

Spellbound company make a sell 500,000 "wandies" a year for £15 each.Fixed costs are £350,000 a year and variable costs are £12 per unit. By how much can the existing level of sales fall before the company starts to make a loss?

The Statement of Financial Position Balance Sheetand What It Tells Us

The Income Statement Profit and Loss Account

The Development of Financial Reporting

Ratios and Interpretation: a Straightforward Introduction

How the Stock Market Assesses Company Performance

Cash Flow Statements: Understanding and Preparation

Advanced Interpretation of Company and Group Accounts

Current Issues in Financial Reporting

Bookkeeping to Trial Balance

Trial Balance to Final Accounts

Financing a Business

Management of Working Capital

Introduction to Management Accounting

Investment Appraisal

Budgetary Planning and Control

Absorption Costing

Standard Costing and Variance Analysis

Incomplete Records

Filters

Exam 17: Marginal Costing and Decision-Making

Marginal costing is appropriate for the valuation of closing inventory in financial accounting

The MoneyTalks company produces and sells 125,000 units a year for £50 each.Variable costs are £40 and annual fixed costs are £600,000. Calculate the contribution per unit.

Which of the following statements is false?

In practice,direct material costs per unit might decrease as output increases because of:

"Contribution" can be defined as sales minus variable costs

Which of the following is not an assumption associated with marginal costing and break-even analysis?

The break-even point can be expressed as:

The MoneyTalks company produces and sells 125,000 units a year for £50 each.Variable costs are £40 and annual fixed costs are £600,000. Calculate the contribution per unit.

"Contribution" is defined as:

Marginal costing information can only be presented for business as a whole and not for each product

The "Break Even" point for a manufacturing company is defined as:

The MoneyTalks company produces and sells 125,000 units a year for £50 each.Variable costs are £40 and annual fixed costs are £600,000. Calculate the break-even point in sales revenue.

Before contribution can be calculated,fixed costs and variable costs have to be separated

Which of the following is NOT a limitation of marginal Costing?

The KMuir company is planning to sell a new product which they will sell for £55 each.Fixed costs are £35,000 per annum; variable costs are £35 per unit.How much do they need to sell to break-even?

The results of AB/CB company are as follows: Sales 15,000 units at £45 each 675,000 Variable costs at £37.50 each 562,500 Fixed costs 67,500 Profit 45,000 How many more units do they need to sell to make a profit of £75,000?

The break-even point can be expressed as:

In measuring the previous relationship between costs,detailed mathematical accuracy is more important than "realistic assumptions"

Which of the statements is correct?

Spellbound company make a sell 500,000 "wandies" a year for £15 each.Fixed costs are £350,000 a year and variable costs are £12 per unit. By how much can the existing level of sales fall before the company starts to make a loss?

The Statement of Financial Position Balance Sheetand What It Tells Us

The Income Statement Profit and Loss Account

The Development of Financial Reporting

Ratios and Interpretation: a Straightforward Introduction

How the Stock Market Assesses Company Performance

Cash Flow Statements: Understanding and Preparation

Advanced Interpretation of Company and Group Accounts

Current Issues in Financial Reporting

Bookkeeping to Trial Balance

Trial Balance to Final Accounts

Financing a Business

Management of Working Capital

Introduction to Management Accounting

Investment Appraisal

Budgetary Planning and Control

Absorption Costing

Standard Costing and Variance Analysis

Incomplete Records

Filters