Marginal Costing – Corporate and Management Accounting MCQBy CACSMockTest / November 25, 2022 2 Marginal Costing – Corporate and Management Accounting MCQ 1 / 68 : P/V Ratio is 25% and margin of safety is ₹ 6,00,000, the amount of profit is: (A) ₹ 2,00,000 (B) ₹ 1,60,000 (C) ₹ 1,50,000 (D) ₹ 1,20,000 2 / 68 The following information is given:Sales to earn a profit of ₹ 16,000 will be: (A) ₹ 40,000 (B) ₹ 60,000 (C) ₹ 50,000 (D) ₹ 75,000 3 / 68 June 2019: The effect of sale price reduction always reduces the P/V ratio to raise and shorten the (A) BEP and Margin of Safety (B) Fixed Cost and BEP (C) Margin of Safety and BEP (D) Profit and BEP 4 / 68 June 2019: Selling price per unit ₹ 20, Trade discount 5% of selling price, cash discount 2% on sales, Material cost ₹ 3, Labour cost ₹ 4, Fixed overheads ₹ 22,000 and variable overheads 80% of labour cost. what would be the net profit if sales are 10% above the BEP? (A) ₹ 2,000 (B) ₹ 2,500 (C) ₹ 2,200 (D) ₹ 1,850 5 / 68 : The total cost and profit during two periods are as follows:The profit volume ratio will be: (A) 15% (B) 25% (C) 20% (D) 33.33% 6 / 68 Selling price ₹ 20 per unit, Variable cost ₹ 15 per unit and Fixed cost ₹ 48,000. What will be BEP sales (in ₹ ) and Profit if actual sales are 40% more than BEP sales? (A) ₹ 1,92,000 and 20,800 (B) ₹ 1,80,000 and ₹ 18,000 (C) ₹ 96,000 and ₹ 9,600 (D) ₹ 1,92,000 and ₹ 19,200 7 / 68 Dec 2018: Which of the following techniques of costing is also known as out-of-pocket costing? (A) Standard Costing (B) Historical Costing (C) Marginal Costing (D) Uniform Costing 8 / 68 Dec 2018: If the P/V Ratio is 30%, Margin of Safety is 40% and BEP is ₹ 48 Lakh, then the profit will be: (A) ₹ 9.60 Lakh (B) ₹ 14.40 Lakh (C) ₹ 5.76 Lakh (D) ₹ 24 Lakh 9 / 68 Dec 2018: The production cost of 1,0 units of an article is as follows: Costs ₹ Direct Material 4,00,000 Direct Wages 3,00,000 Fixed & Variable Overheads 2,00,000The company produced 5,000 units and sold at ₹ 1,000 per unit and earned a profit of ₹ 10,00,000. The amount of variable overhead per unit is: (A) ₹ 200 (B) ₹ 75 (C) ₹ 100 (D) ₹ 120 10 / 68 Dec 2018: Given, Sales ₹ 80 Lakh; Net Profit ₹ 8 Lakh and Fixed Cost ₹ 12 Lakh. On the basis of the data, if sales is ₹ 120 Lakh, then the profit will be: (A) ₹ 18 Lakh (B) ₹ 12 Lakh (C) ₹ 10 Lakh (D) ₹ 6 Lakh 11 / 68 Dec 2018: If the standard output for 8 hours is 200 units and the actual output in 10 hours is 350 units, the efficiency level will be: (A) 175% (B) 140% (C) 57.14% (D) 71.42% 12 / 68 June 2018: ABC Ltd. shows break-even sales of ₹ 40,500 and budgeted sales of ₹ 50,000. Compute the margin of safety ratio? (A) 19% (B) 81% (C) 1.81% (D) Require more data to calculate 13 / 68 June 2018: Actual overheads for the year ending 31st March 2017 were ₹ 21,000, whereas the overhead absorbed shows an over absorption of ₹ 1,000 for the same period. If the direct labour cost is ₹ 1,00,000, then the overhead absorption rate based on direct wages would be: (A) 20% (B) 21% (C) 22% (D) 25% 14 / 68 June 2018: When the sales increase from ₹ 40,000 to ₹ 60,000 and profit increases by ₹ 5,000, the P/V ratio is: (A) 20% (B) 30% (C) 25% (D) 40% 15 / 68 June 2018: A company, which has a margin of safety of ₹ 2,00,000 makes a profit of ₹ 40,000. If the fixed cost is ₹ 2,50,000, break-even sales of the company would be: (A) ₹ 15,00,000 (B) ₹ 12,50,000 (C) ₹ 10,00,000 (D) ₹ 20,00,000\ 16 / 68 June 2018: A manufacturing company provides you with the following information for the coming month: Budgeted sales revenue ₹ 7,50,000 Budgeted contribution ₹ 3,00,000 Budgeted profit ₹ 75,000 (A) ₹ 9,37,500 (B) ₹ 5,25,000 (C) ₹ 5,62,500 (D) ₹ 6,75,000 17 / 68 : Which of the statement is not true in respect of cost-volume-profit analysis? (A) In order to forecast profit accurately, it is essential to know the relationship between profits and costs on the one hand and volume on the other. (B) Cost-volume analysis is not suitable for setting up flexible budgets which indicate costs at various levels of activity. (C) Cost-volume-profit analysis is of assistance in performance evaluation for the purpose of control. (D) Analysis of cost-volume-profit relationship may assist in formulating price policies to suit particular circumstances by projecting the effect which different price structures have on costs and profits. 18 / 68 June 2018: If the P/V ratio of a product is 25% and the selling price is ₹ 25 per unit, the marginal cost of the product would be: (A) ₹ 18.75 (B) ₹ 16 (C) ₹ 15 (D) ₹ 20 19 / 68 Dec 2017: R.V. Ltd., made a sale for ₹ 4,50,000 in the first half and for ₹ 5,00,000 in the second half of 2016. In this year the total cost for the first and the second half of the year were respectively ₹ 4,00,000 and ₹ 4,30,000. If there is no change in selling price and variable cost and that the fixed expenses are incurred equally, the break-even sales for the whole year is: (A) ₹ 6,50,000 (B) ₹ 6,00,000 (C) ₹ 5,00,000 (D) ₹ 4,50,000 20 / 68 Dec 2017: Mr. R’s sales and profit in 2015 were respectively ₹ 1,20,000 and ₹ 8,000. His sales & profit in 2016 were ₹ 1,40,000 & ₹ 13,000 respectively. In this case his margin of Safety in 2016 was: (A) ₹ 32,000 (B) ₹ 52,000 (C) ₹ 88,000 (D) ₹ 1,36,000 21 / 68 Dec 2017: When fixed costs are ₹ 90,000, the ratio of variable cost to sales is 75% and the break-even point occurs at 60% of the capacity sales, the capacity sales are: (A) ₹ 4,50,000 (B) ₹ 5,60,000 (C) ₹ 6,00,000 (D) ₹ 7,50,000 22 / 68 Dec 2017: Marginal Costing in America is called as: (A) Differential costing (B) Out-of-pocket costing (C) Direct costing (D) Variable costing 23 / 68 Consider the following statements:(1) Marginal costing and absorption costing are the same.(2) For decision-making, absorption costing is more suitable than marginal costing.(3) Cost-volume-profit relationship also denotes the break-even point.(4) Marginal costing is based on the distribution between fixed and variable costs. (A) 4 and 2 (B) 2 and 3 (C) 3 and 4 (D) 1 and 2 24 / 68 Assertion (A):ProRt volume ratio is considered to be the best indicator of the profitability of the business. Reason (R):If the profit volume ratio improved, it will result in better profits. (A) A is false, but R is true (B) A is true, but R is false (C) Both A & R are true but R is not the correct explanation of A (D) Both A & R are true and R is the correct explanation of A 25 / 68 Which of the following is not true? (A) P/V Ratio = Profit Margin of Safety × 100 (B) Break-even Point = Fixed Cost P/V ratio (C) Break-even Point = Fixed Cost P/V ratio × 100 (D) P/V Ratio = Undefined control sequence \operatorname × 100 26 / 68 June 2017: Under marginal costing system, product costs are: (A) Equal to fixed cost plus variable costs (B) Equal to only marginal costs (C) Equal to semi-variable costs (D) None of the above 27 / 68 June 2017: If the total cost of producing 20,000 units of a product is ₹ 90,000 and if 25,000 units will be produced, then the total cost will be ₹ 1,05,000 and the selling price is ₹ 8 per unit. The break-even point will be: (A) 10,000 units (B) 8,000 units (C) 6,000 units (D) 5,000 units 28 / 68 June 2017: A plant is operating at 60% capacity. The fixed costs are ₹ 30,000, the variable costs are ₹ 1,00,000 and the sales amount to ₹ 1,50,000. The percentage of capacity at which the plant should operate to earn a prophet of ₹ 40,000 will be: (A) 80% (B) 84% (C) 90% (D) 94% 29 / 68 June 2017: Yadhav Co. has an annual fixed cost of ₹ 1,20,000. In 2015 sales amounted to ₹ 6,00,000 as compared to ₹ 4,50,000 in 2014 and prophet in 2015 was ₹ 50,000 higher than in 2014. If there is no need to expand the company’s capacity. The prophet or loss in 2016 on a forecasted sales of ₹ 9,00,000 will be: (A) ₹ 1,80,000 (B) ₹ 1,90,000 (C) ₹ 1,70,000 (D) ₹ 1,85,000 30 / 68 A company sells its product at ₹ 15 per unit. In a period if it produces and sells 8,000 units, it incurs a loss of ₹ 5 per unit. If the volume is raised to 20,000 units, it earns a profit of ₹ 4 per unit. Break-even point in units will be: (A) 13,000 units (B) 12,000 units (C) 14,000 units (D) 10,000 units 31 / 68 A factory engaged in manufacturing plastic buckets is working at 40% capacity and produces 10,0 buckets per annum. The present cost-break-up for one bucket is as under: Materials ₹ 10 Labour ₹ 3 Overheads ₹ 5 (60% fixed)The selling price per bucket ₹ 20. If the factory operates 90% of capacity the profit will be: (A) ₹ 75,000 (B) ₹ 80,000 (C) ₹ 82,500 (D) ₹ 92,500 32 / 68 In a period sales amount to ₹ 2,00,000, net profit ₹ 20,000 and Fixed overheads are ₹ 30,000. If sales ₹ 3,00,000 profit will be: (A) ₹ 48,000 (B) ₹ 50,000 (C) ₹ 40,000 (D) ₹ 45,000 33 / 68 From the following data, the P/V ratio will be: (A) 50% (B) 10% (C) 20% (D) 40% 34 / 68 June 2017: In a purely competitive market, 10,000 pocket transistors can be manufactured and sold and certain profit is generated. It is estimated that 2,0 pocket transistors need to be manufactured and sold in a monopoly market to earn the same profit. Profit under both conditions is targeted at ₹ 2,00,000. The variable cost per transistor is ₹ 100 and the total fixed costs are ₹ 37,000. You are required to find out the unit selling price per transistor under competitive condition. (A) ₹ 125.70 (B) ₹ 123.70 (C) ₹ 128.70 (D) ₹ 228.70 35 / 68 June 2017: Mr Mahesh has a sum of ₹ 3,00,000 which invested in a business. He wishes for a 15% return on his fund. It is revealed from the present cost data analysis that the variable cost of operation is 60% of sales and fixed costs are ₹ 1,50,000 p.a. On the basis of this information, you are required to find out the sales volume to earn a 15% return. (A) ₹ 4.875 Lakhs (B) ₹ 4.675 Lakhs (C) ₹ 4.775 Lakhs (D) ₹ 5.875 Lakhs 36 / 68 : Ramya Ltd. furnishes the following information:Production 10,000 units,Sales 10,000 units,Selling price ₹ 12 per unit,Variable cost ₹ 6 per unit,Fixed costs ₹ 40,000 per annum (normal capacity of 10,000 units)Profit/Loss under marginal costing method will be: (A) ₹ 10,000 (B) ₹ 30,000 (C) ₹ 20,000 (D) ₹ 25,000 37 / 68 Statement -1When there are no inventories, the profit figure under marginal costing and absorption costing is identical. Statement – IIInventories are valued at cost of production in absorption and marginal costing systems. (A) Both statements are correct (B) Both statements are incorrect (C) Statement-I is incorrect, but Statement-!! is correct (D) Statement-I is correct, but Statement-II is incorrect 38 / 68 Following information is given for a product of a manufacturing company:Material ₹ 18 per unit; other variable costs ₹ 22 per unit; and fixed expenses ₹ 18 per unit. The selling price is ₹ 75 per unit. The company is presently producing 80.0 units at 80% capacity. The company received an offer for 20,000 units from a foreign customer. The minimum price to be accepted from a foreign customer, if the company wants to earn 20% on foreign sales will be (A) ₹ 50 (B) ₹ 58 (C) ₹ 72.50 (D) ₹ 69.60 39 / 68 In a purely competitive market, 10,000 pocket transistors can be manufactured and sold and certainprofit is generated. It is estimated that 2.0 pocket transistors need to be manufactured and sold in a monopoly market to earn the same profit. Profit under both conditions is targeted at ₹ 2,00,000. The variable cost per transistor is ₹ 100 and total fixed costs are ₹ 37,000. Unit selling price per transistor under monopoly condition will be (A) ₹ 218.50 (B) ₹ 234.50 (C) ₹ 267.25 (D) ₹ 274.35 40 / 68 A radio manufacturer finds that while it costs 16.25 per unit to make a component, the same is available in the market at ₹ 5.75 each. Continuous supply is also fully assured. The break-up of costs per unit is as follows:Materials: ₹ 2.75Labour: ₹ 1.75Other variable expenses: ₹ 0.50Depreciation & other fixed costs: ₹ 1.25The best option for the manufacturer will be (A) To make (B) To buy (C) To sell (D) None of the above 41 / 68 June 2016: The ratio of variable cost to sales is 75%. The break-even point occurs at 64% of the capacity sales when fixed cost is ₹ 1,20,000. The 100% capacity sales will be (A) ₹ 4,80,000 (B) ₹ 12,50,000 (C) ₹ 7,50,000 (D) None of the above 42 / 68 June 2016: Aman Ltd. sells its products at ₹ 16 per unit. In a period, if it produces and sells 20,000 units, it incurs a loss of ₹ 2 per unit. If the volume is doubled, it earns a profit of ₹ 2.20 per unit. The amount of fixed cost and breakeven point (in units) will be (A) ₹ 1,68,000 and 26,250 units (B) ₹ 8,000 and 53,333 units (C) ₹ 1,60,000 and 25,000 units (D) ₹ 1,70,000 and 42,500 units 43 / 68 June 2016: A company producing three products, viz., X, Y and Z has a sales mix in the ratio of 2:1:3. The profit volume ratio of the products X, Y and Z are 15%, 30% and 20% respectively. The total fixed cost of the company is ₹ 3,50,000. The break-even point of the company will be (A) ₹ 16,15,390 (B) ₹ 17,50,000 (C) ₹ 23,33,333 (D) ₹ 11,66,667 44 / 68 : Cost-Volume-Profit analysis is based on several assumptions. Which one of the following is not one of these assumptions (A) Sales mix of the products is constant (B) The behaviour of both sales and variable cost is linear throughout the relevant range (C) Variable cost per unit will remain constant (D) Productivity and operational efficiency will change according to output 45 / 68 Following data are given:Direct labour hours available are 72,000 hours.What should be the number of units of A and B to be produced to maximize the profit of the company? (A) A-10,000 units, B-5,500 units (B) B-10,000 units, A-5,500 units (C) B-10,000 units, A-6,400 units (D) 10,000 units of each A and B 46 / 68 There are two similar plants under the same management. The management desires to merge these two plants. The following particulars are available:The capacity of the merged plant to be operated for the purpose of break-even will be (A) 45.14% (B) 48.12% (C) 50.76% (D) 46.15% 47 / 68 Cost-volume-profit (CVP) analysis is based on several assumptions. Which one of the following is not relevant for such an analysis (A) Inventory quantity changes in the year (B) Sales mix of the products is constant (C) Material price and labour rates do not change (D) Behaviour of both sales and variable cost is linear throughout the year 48 / 68 Choose the correct statements from the following:(1) Marginal costing and absorption costing are the same(2) For decision making, absorption costing is more suitable than marginal costing(3) Cost-volume-profit relationship also denotes break-even point(4) Marginal costing is based on the distinction between fixed and variable costs. (A) (1) and (2) (B) (2) and (3) (C) (3) and (4) (D) (2) and (4) 49 / 68 Dec 2015: A company sells its product at ₹ 15 per unit. In a period, it produces and sells 8,000 units and incurs a loss of ₹ 5 per unit. If the sales volume were to be raised to 20,000 units, it could earn a profit of ₹ 4 per unit. The Break-even point (in units) will be (A) 24,000 Units (B) 12,000 Units (C) 16,000 Units (D) 30,000 Units 50 / 68 Statement-I:The margin of safety represents the difference between sales at the break-even point and total sales. Statement-II:The margin of safety can be expressed as a percentage of total sales or in value or in terms of quantity. (A) Both statements are correct (B) Both statements are incorrect (C) Statement-I is correct, but Statement-II is incorrect (D) Statement-I is incorrect, but Statement-II is correct. 51 / 68 Which of the following are advantages of marginal costing :(1) Pricing decision(2) True profit(3) Difficulty to classify(4) Ignores time value(5) Break-even analysis(6) Contribution is not final(7) Control over expenditure (A) (1), (2). (5) and (7) (B) (1), (3), (5) and (7) (C) (3), (4), (6) and (7) (D) (1), (2), (6) and (7) 52 / 68 The following data is obtained from the records of Mayur Ltd: (A) ₹ 45,000 (B) ₹ 52,000 (C) ₹ 55,000 (D) ₹ 55,500 53 / 68 Assertion (A):The business earns a surplus of sale revenue over variable costs, which is called a contribution. Reason (R):Once fixed costs are fully recovered such excess contribution is termed as profit.Select the correct answer from the options given below (A) Both A and R are true and R is the correct explanation of A (B) Both A and R are true, but R is not the correct explanation of A (C) A is true, but R is false (D) A is false, but R is true 54 / 68 Dec 2015: Manoj Ltd. manufactures three products P, Q and R. The unit selling price of these products are ₹ 100, ₹ 160 and ₹ 75 respectively. The corresponding unit variable costs are ₹ 50, ₹ 80 and ₹ 30. The proportions (quantity-wise) in which these products are manufactured and sold are 20%, 30% and 50% respectively. Total fixed costs are ₹ 14,80,000. Overall breakeven quantity is (A) 26,195 Units (B) 27,195 Units (C) 27,165 Units (D) 28,165 Units 55 / 68 The following information is given about Zac Ltd. dealing in musical instruments:P/V ratio 50% Margin of safety 40%If the sales volume is ₹ 50,00,000 the net profit will be (A) ₹ 15,00,000 (B) ₹ 10,00,000 (C) ₹ 20,00,000 (D) ₹ 5,00,000 56 / 68 Dec 2015: Z Ltd. recorded sales of ₹ 60 lakh in 2014 as compared to ₹ 45 lakh in 2013. Profit for 2014 was ₹ 5 lakh higher than that in 2013. If the annual fixed costs amount to ₹ 12 lakh, the profit on projected sales of ₹ 90 lakh will be (A) ₹ 15 lakh (B) ₹ 14 lakh (C) ₹ 12 lakh (D) ₹ 18 lakh 57 / 68 June 2015: The selling price of a product-X is ₹ 50 per unit, variable cost ₹ 20 per unit and 2 kg of raw material are needed to produce a unit of product-X. The contribution per kg of raw material will be – (A) ₹ 30 (B) ₹ 15 (C) ₹ 60 (D) ₹ 50 58 / 68 June 2015: The selling price of a product is 1550 per unit, variable cost ₹ 50 per unit and fixed cost ₹ 10,000. The number of units required to be sold to earn a profit of ₹ 10,000 will be – (A) 400 (B) 40 (C) 36 (D) 220 59 / 68 A product is sold at ₹ 150 per unit and its variable cost is ₹ 70 per unit. The fixed expenses of the business are ₹ 8,000 per year. The Break-even point (in units) is (A) 200 units (B) 50 units (C) 115 units (D) 100 units 60 / 68 When the sales increase from ₹ 45,000 to ₹ 60,000, the profit increases by ₹ 5,000. P/V Ratio would be (A) 20% (B) 30% (C) 33.33% (D) 66.67% 61 / 68 June 2015: A company has an annual fixed cost of ₹ 1,68,000. In the year 2013-2014, sales amounted to ₹ 6,00,000 as compared to ₹ 4,50,000in the preceding year 2012-2013. The profit in the year 2013-2014 was ₹ 42,000 more than that in the year 2012-2013. The break-even sales of the company are (A) 6,00,000 (B) 6,20,000 (C) 5,60,000 (D) 4,08,000 62 / 68 What is the margin of safety, if profit is equal to 140,000 and P/V ratio is 25% (A) ₹ 1,60,000 (B) ₹ 1,00,000 (C) ₹ 16,000 (D) ₹ 10,000 63 / 68 Dec 2014: A company that has a margin of safety of ₹ 4,00,000 makes a profit of ₹ 1,00,000. If its fixed cost is ₹ 5,00,000, then break-even sales are: (A) ₹ 20 lakh (B) ₹ 25 lakh (C) ₹ 12.5 lakh (D) ₹ 15 lakh 64 / 68 The following information relates to a product:Direct materials: 10 kg @ ₹ 0.50 per kg.Direct labour: 1 hour 30 minutes @ ₹ 4 per hourVariable overheads: 1 hour 30 minutes @ ₹ 1 per hourFixed overheads @ ₹ 2 per hour (based on a budgeted production volume of 90,0 direct labour hours for the year)Selling price per unit: ₹ 17 The break-even point is (A) ₹ 40,000 units (B) ₹ 40,000 (C) ₹ 20,000 units (D) ₹ 7,200 units 65 / 68 Which of the following formula cannot be used for calculating the contribution (A) Fixed cost plus profit (B) Fixed cost minus loss (C) Sales minus variable cost (D) Fixed cost plus loss 66 / 68 Dec2014: For a given product, the selling price per unit is 15, the variable cost per and units sold during the period are 35,000. The margin of safety is (A) ₹ 25,000 (B) ₹ 75,000 (C) ₹ 15,000 (D) ₹ 5,000 67 / 68 Dec 2014: For a given product, the sales of a company @ ₹ 200 per unit is ₹ 20,00,000. Variable cost is ₹ 12,00,000 and fixed cost is ₹ 6,00,000. The capacity of the factory is 15,000 units. Capacity utilization at break-even point level (A) 40% (B) 50% (C) 60% (D) 100% 68 / 68 : Which of the following formula cannot be used for calculating the P/V ratio (A) (Sales value minus variable cost) / Sales value (B) (Fixed cost plus profit)/Sales value (C) Change in profits/Change in sales (D) Profit/Sales value Your score is LinkedIn Facebook Twitter VKontakte