# Marginal Costing As A Tool For Decision-Making - Part 3 - MCQs

## Marginal Costing As A Tool For Decision-Making - Part 3 - MCQs

1. Minimum price is calculated as

a) Variable cost + Fixed costs
b) Marginal cost + Contribution
c) Marginal cost-Contribution
d) None of the above

ANSWER: a) Variable cost + Fixed costs

2. ABC Company manufactures and sells trucks at Rs 75,000 each made up of Direct Materials Rs 30,000, Direct Labour Rs 8,000 Variable Overheads is Rs 12,000, Fixed overheads is Rs 6,000, Variable selling expenses is Rs 3,000 Royalty is Rs 4,000 Profit is Rs 7,000. There is enough idle capacity. If the company decides to sell 4 trucks to ABC Company under the same management, what should be the minimum price to be charged?

a) Rs 86,000
b) Rs 54,000
c) Rs 45,000
d) None of the above

3. 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

4. During trade recession, the goods are sold at

a) Depression price
b) Normal price
c) Minimum price
d) None of the above

5. While making a pricing decision under Special price, if price is greater than marginal cost,

a) Acceptance and rejection depends on product type
b) Order should be rejected
c) Order should be accepted
d) None of the above

ANSWER: c) Order should be accepted

6. 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