Marginal cost is the expense incurred by a business for producing an additional unit of a good or service. It is calculated by taking the total cost of producing additional products and dividing it by the total number of extra units produced.

Below is a list of multiple-choice questions and answers on Marginal Costing to help students understand the topic better.

1. If the total cost of 1000 units is Rs.60000 and that of 1001 units is Rs.60400, then the increase of Rs.400 in the total cost is _________.
   1. Prime cost
   2. All variable overheads
   3. Marginal cost
   4. None of the above

Answer: c

2. Which of the following statements are true about marginal costing?
   1. In marginal costing, fixed costs are treated as product costs
   2. Marginal costing is not an independent system of costing
   3. The elements of cost in marginal costing are divided into fixed and variable components
   4. Both b and c

Answer: d

3. The costing method where fixed factory overheads are added to inventory is called __________.
   1. Activity-based costing
   2. Absorption costing
   3. Marginal costing
   4. All of the above

Answer: b

4. While computing profit in marginal costing, ________.
   1. The fixed cost gets added to the contribution
   2. The total marginal cost gets deducted from total sales revenue
   3. The total marginal cost gets added to total sales revenue
   4. None of the above

Answer: b

5. Which of the following assumptions are made while calculating marginal cost?
   1. Total fixed cost is constant at all levels of output
   2. Total variable cost varies according to the volume of output
   3. All elements of cost can be divided into fixed and variable components
   4. All of the above

Answer: d

6. Contribution margin in marginal costing is also known as _________.
   1. Net income
   2. Gross profit
   3. Marginal income
   4. None of the above

Answer: c

7. The term ‘Contribution’ refers to the ___________.
   1. Excess of selling price over variable cost per unit
   2. Difference between the selling price and total cost
   3. Subscription towards raising capital
   4. None of the above

Answer: a

8. Which of the following techniques of costing differentiates between fixed and variable costs?
   1. Marginal costing
   2. Standard costing
   3. Absorption costing
   4. None of the above

Answer: a

9. Fixed cost is also referred to as ________ in the marginal costing technique.
   1. Total cost
   2. Product cost
   3. Period cost
   4. None of the above

Answer: c

10. Variable cost is also referred to as ________ in the marginal costing technique.
    1. Total cost
    2. Product cost
    3. Period cost
    4. None of the above

Answer: b

11. The margin of safety, which is the difference between actual sales and break-even point, can be improved by _________.
    1. Lowering variable costs
    2. Lowering fixed costs
    3. Increasing sales volumes
    4. All of the above

Answer: d

12. An increase in the variable cost ________.
    1. Decreases the break-even point
    2. Improves margin of safety
    3. Improves the profit/volume ratio
    4. All of the above

Answer: d

13. The profit/volume ratio in marginal costing can be improved by ________.
    1. Lowering fixed cost
    2. Increasing the selling price
    3. Increasing variable cost
    4. None of the above

Answer: b

14. Under marginal costing, the stock is valued at ________.
    1. Total Cost
    2. Fixed Cost
    3. Variable Cost
    4. None of the above

Answer: c

15. The profit at which total revenue is equal to the total cost is known as ___________.
    1. Margin of safety
    2. Break-even point
    3. Both a and b are incorrect
    4. Both a and b are correct

Answer: b

16. The cost that does not fluctuate based on the volume of the production is known as ___________.
    1. Variable cost
    2. Fixed cost
    3. Semi-variable cost
    4. None of the above

Answer: b

17. How is the break-even point affected by the fixed cost?
    1. If the fixed cost decreases, the break-even point decreases
    2. If the fixed cost increases, the break-even point decreases
    3. If the fixed cost remains constant, the break-even point decreases
    4. None of the above

Answer: a

18. Fixed cost includes _________.
    1. Property taxes
    2. Rent
    3. Insurance premium
    4. All of the above

Answer: d

19. Variable cost includes _________.
    1. Cost of raw materials
    2. Salaries and wages
    3. Electricity bills
    4. All of the above

    Answer: d

20. Marginal cost is equal to _________.
    1. Variable overheads
    2. Prime cost plus variable overheads
    3. Prime cost minus variable overheads
    4. None of the above

Answer: b

Also See:

• Difference between Depreciation Expense and Accumulated Depreciation
• Difference between Fixed Cost and Variable Cost