# Marginal Costing As A Tool For Decision-Making - Part 4 - MCQs

## Marginal Costing As A Tool For Decision-Making - Part 4 - MCQs

1. 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: c) Net escapable fixed costs

2. Shut-down point is calculated by

a) Net escapable fixed costs * Contribution per unit
b) Net escapable costs* P/V ratio
c) Net escapable costs/Contribution per unit
d) None of the above

ANSWER: d) None of the above

3. A decision regarding temporary closure should be made on

a) Cost data
b) Economic factors
c) Social factors
d) All of the above

ANSWER: d) All of the above

4. 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: b) Avoidable expenses/Contribution per unit of raw materials

5. 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

6. Which of the following principles should be followed by 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: d) None of the above

7. 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