top of page # Marginal costing and absorption costing

A level and AS level

➡️QUESTION⬅️

A company’s profits using marginal costing and absorption costing principles were identical.

Which statement is true about the company’s production units?

A they were greater than break-even units
B they were greater than the sales units
C they were the same as the break-even units
D they were the same as the sales units

➡️QUESTION⬅️

When is marginal costing less useful than absorption costing?

A when choosing to make or buy a product
B- when dealing with a limiting factor
C when producing a special order
D when valuing closing inventory

➡️QUESTION⬅️

A company calculates its profit using marginal costing as \$90000 for a month.

Opening inventory was 4000 units and closing inventory 6000 units.

The fixed production overhead absorption rate is \$20 per unit.

What is the profit under absorption costing?

A \$10000
B \$50000
C \$130000
D \$170000

➡️QUESTION⬅️

Which statements about the limitations of marginal costing are correct?

1. Finance costs are not included in the manufacturing overheads.

2 Variable cost per unit changes at different levels of activity.

3 Some costs may be semi-variable costs.

A 1and2
B 1only
C 2and3
D 3only

➡️QUESTION⬅️

Which item is a direct cost?

A cost of production materials
B factory supervisor's salary
C machine cleaning materials
D stores staff wages

➡️QUESTION⬅️

Samuel manufactures a single product. Total cost per unit is \$70 when production is 100 units
per week, and \$62.50 when production is 160 units per week.
What are the total fixed costs per week?
A \$450 B \$750 Cc \$1200 D \$2000

➡️QUESTION⬅️

A company uses absorption costing and makes and sells one product. In the last month budgeted
overheads totalled \$60000. Budgeted production was 15000 units and budgeted sales were 14000 units.

The company now decides to apply marginal costing principles for last month.

What effect will this have on profits?
A \$3500 decrease

B \$3500 increase
C \$4000 decrease
D \$4000 increase

➡️QUESTION⬅️

The direct material cost of 20000 units is \$8000. 400 direct labour hours are required at a cost of
\$6000. Overheads are absorbed at 150% of the cost of direct labour.

What is the cost per unit?

A \$0.40
B \$0.70
C \$0.85
D \$1.15

➡️QUESTION⬅️

A company makes a single product and sells it for \$12 per batch.

The variable cost is \$4 per batch.

Fixed costs have been absorbed based on a normal activity level of 1000 batches at
\$3 per batch.

What is the profit under marginal costing if the company makes and sells 1500 batches?

A \$6000
B \$7500
C \$9000
D \$12000

➡️QUESTION⬅️

A company produces less than it sells in a particular period.

Which statement is correct?

A Reported profit is the same whether absorption or marginal costing is used.
B Reported profit is the difference between absorption and marginal costing closing
inventories.
C Reported profit is lower using absorption costing.
D Reported profit is lower using marginal costing.