# Differential Costing - Part 2 - MCQs with answers

## Differential Costing - Part 2 - MCQs with answers

1. Differential cost is a part of routine accounting records.

a) True
b) False

2. 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: c) Marginal cost and Differential cost are same

3. Differential costs are obtained on the basis of

a) Absorption costing
b) Marginal costing
c) Both a & b
d) None of the above

ANSWER: c) Both a & b

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

5. 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

6. 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: a) Rs 15,000 Rs 3

7. 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