# Differential Costing - Finance (MCQ) Questions and answers

1)   A facility, the installed capacity of which is 1,00,000 units, has budgeted 70% level of activity as Materials Rs 1,05,000, Wages Rs 1,40,000 Variable overheads Rs 70,000 and Fixed overheads Rs 20,000. Production is now proposed at 80,000 units. Determine Marginal cost p.u., Differential cost, and Differential cost p.u.

a. Rs 2, Rs 20,000, Rs 4.5
b. Rs 4.5, Rs 45,000, Rs 4.5
c. Rs 5, Rs 50,000, Rs 5
d. None of the above
 Answer  Explanation ANSWER: Rs 4.5, Rs 45,000, Rs 4.5 Explanation: No explanation is available for this question!

2)   Given fixed expenses Rs 20,000 and variable expenses of 10,000 units and 15,000 units are Rs 30,000 and Rs 45,000 respectively. Determine Differential cost, Differential cost p.u.

a. Rs 15,000, Rs 3
b. Rs 10,000, Rs 1
c. Rs 50,000, Rs 2
d. None of the above
 Answer  Explanation ANSWER: Rs 15,000, Rs 3 Explanation: No explanation is available for this question!

3)   In certain decision areas like plant closure and change in capacity, ________is more useful.

a. Differential costing
b. Marginal costing
c. Absorption costing
d. None of the above
 Answer  Explanation ANSWER: Differential costing Explanation: No explanation is available for this question!

4)   In the case of differential costing, ________ is the main criteria for decision making.

a. Contribution
b. Ratios
c. Incremental/decremental revenue
d. None of the above
 Answer  Explanation ANSWER: Incremental/decremental revenue Explanation: No explanation is available for this question!

5)   Differential costs are obtained on the basis of

a. Absorption costing
b. Marginal costing
c. Both a and b
d. None of the above
 Answer  Explanation ANSWER: Both a and b Explanation: No explanation is available for this question!

6)   If there is no change in fixed cost at different levels of output,

a. Marginal costs > Differential cost
b. Marginal costs < Differential cost
c. Marginal cost and Differential cost are same
d. None of the above
 Answer  Explanation ANSWER: Marginal cost and Differential cost are same Explanation: No explanation is available for this question!

7)   Differential cost is a part of routine accounting records.

a. True
b. False

 Answer  Explanation ANSWER: False Explanation: No explanation is available for this question!

8)   The alternative which shows ____ difference between the incremental revenue and the differential cost is the one considered to be the best choice for selection.

a. Maximum
b. Minimum
c. No
d. None of the above
 Answer  Explanation ANSWER: Maximum Explanation: No explanation is available for this question!

9)   The basic data used for differential cost analysis are

a. Cost
b. Revenue
c. Investment data
d. All of the above
 Answer  Explanation ANSWER: All of the above Explanation: No explanation is available for this question!

10)   If direct labor is not affected by the change in the type of material, it will form a part of differential cost.

a. True
b. False

 Answer  Explanation ANSWER: False Explanation: No explanation is available for this question!

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