# Marginal Costing for Decision Making - Finance (MCQ) Questions and answers

1)   In a purely competitive market, 10,000 mobiles can be manufactured and sold for a certain profit. Profit targeted is Rs 2,00,000. The variable cost per mobile is Rs 100 and the total fixed costs are Rs 40,000. Find out unit selling price.

a. Rs 124 per mobile
b. Rs 1.24 per mobile
c. Rs 1240 per mobile
d. None of the above
 Answer  Explanation ANSWER: Rs 124 per mobile Explanation: No explanation is available for this question!

2)   If desired profit is decided, then normal price should be

a. Marginal cost + Contribution
b. Marginal cost + Fixed cost – profit
c. Both a and b
d. None of the above
 Answer  Explanation ANSWER: Marginal cost + Contribution Explanation: No explanation is available for this question!

3)   ABC Ltd manufactures a single product and sales for Rs 30 per unit. There is increased demand of the product. The Direct Material is Rs 8, Direct labour (2 hours) is Rs 4 and Variable overheads is Rs 4. The labour force is working at full capacity and no extra time is available. Mr. X has approached ABC Ltd with a request for manufacture special order at Rs 8,000. Also, 600 hours labour will be required and cost of the order will be Rs 3000 for Direct Material. Variable overhead per hour will be Rs 2. Should the order be accepted? Why?

a. Yes, Net Profit Rs 1,600
b. No, Net loss Rs 1,600
c. No, Net loss Rs 2,000
d. Yes Net Profit Rs 2,000
 Answer  Explanation ANSWER: No, Net loss Rs 1,600 Explanation: No explanation is available for this question!

4)   Rahul has an amount of Rs 3,00,000 which is invested in a business. He desires 15% return on his fund. It is known from the past cost data analysis that fixed costs are Rs 1,50,000 per annum and variable costs of operation are 60% of sales. Determine sales volume to get 15% return. Also tell shut down point of the business, if he would spend Rs 50,000 even if business has to be closed.

a. Rs 2,50,000 and Rs 4,00,000
b. Rs 2,50,000 and Rs 4,87,500
c. Rs 4,87,500 and Rs 2,50,000
d. Rs 4,00,000 and Rs 2,00,000
 Answer  Explanation ANSWER: Rs 4,87,500 and Rs 2,50,000 Explanation: No explanation is available for this question!

5)   Which of the following principles should be followed while making a decision to drop a product/line?

a. Product yielding lowest contribution should be given top priority in production programme
b. A product line should be dropped, if it yields positive contribution
c. If any factor is key factor, the product/line should be dropped, which gives maximum contribution per unit of key factor
d. None of the above
 Answer  Explanation ANSWER: None of the above Explanation: No explanation is available for this question!

6)   While preparing Marginal cost and Contribution Statement, if any factor of production is key factor then ________ should be expressed in terms of per unit of Key factor.

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

7)   When the temporary closure is warranted by the off-season, shut-down point is calculated as

a. Non-escapable expenses / Contribution per unit of raw materials
b. Avoidable expenses / Contribution per unit of raw materials
c. Special costs / Contribution per unit of raw materials
d. None of the above
 Answer  Explanation ANSWER: Avoidable expenses / Contribution per unit of raw materials Explanation: No explanation is available for this question!

8)   A decision regarding temporary closure should be made on

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

9)   While taking shut-down decisions, the amount of contribution should be compared with

a. Escapable fixed costs
b. Special costs
c. Net escapable fixed costs
d. None of the above
 Answer  Explanation ANSWER: Net escapable fixed costs Explanation: No explanation is available for this question!

10)   The few items of fixed costs which can be saved or eliminated by suspending the trading activities are

a. Escapable fixed costs
b. Special fixed costs
c. Suspension fixed costs
d. None of the above
 Answer  Explanation ANSWER: Escapable fixed costs Explanation: No explanation is available for this question!

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