Marginal Costing & Profit Volume Ratio
- To obtain the break-even point in rupee sales value, total fixed costs are divided by:
(a) Variable cost per unit
(b) Contribution margin per unit
(c) Fixed cost per unit
(d) Profit/volume ratio - The break-even point is the point at which
(a) There is no profit no loss
(b) Contribution margin is equal to total fixed cost
(c) Total revenue is equal to total cost
(d) All of the above - Margin of safety is referred to as:
(a) Excess of actual sales over fixed expenses
(b) Excess of actual sales over variable expenses
(c) Excess of actual sales over break-even sales
(d) Excess of actual sales over fixed costs - CVP analysis is based on several assumption. Which one of the following is not one of theses assumptions:
(a) The sales mix of the products is constant
(b) Inventory quantities change during the year
(c) Material prices and labour rates do not change
(d) The behaviour of both sales and variable cost is linear throughout the relevant range. - Which of the following is NOT an assumption of break-even analysis
(a) Total fixed cost does not change
(b) Total variable cost does not change
(c) General price level does not change
(d) Product mix does not change. - When sales volume increases
(a) Break even point increases
(b) Total profit increases
(c) Total loss increases
(d) All of these - The alternative that would decrease contribution per unit –
(a) Decrease Fixed Cost
(b) Increase in variable cost
(c) Increase in selling price
(d) Increase in Fixed Cost - An increase in fixed cost results in
(a) Increase in margin of safety
(b) Increase in profit/volume ratio
(c) Increase in break-even point
(d) Increase in contribution - Which is a correct marginal costing equation ?
(a) p = s – v – f
(b) s – v = f – p
(c) f – l = s + v
(d) s = v + f – p - Which of the following affect the break even point ?
(1) Number of units sold
(2) Variable cost per unit
(3) Total fixed cost
(4) Margin of safety
Codes:
(a) 1, 3 and 4
(b) 1, 2 and
(c) 2, 3 and 4
(d) 1 and 3 - Margin of safety is equal to
(a) Actual sales – Sales at Break-even point
(b) Actual sales + Sales at Break-even point
(c) Actual sales × Sales at Break-even point
(d) Actual sales / Sales at Break-even point - At break-even point
(a) Total expenses = Total revenue
(b) Total expenses > Total revenue
(c) Total expenses < Total revenue
(d) Any of the above - The break-even point is the point where:
(a) Total sales revenue equals total expenses (variable and fixed)
(b) Total contribution margin equals total fixed expenses
(c) Total sales revenue equals to variable expenses only
(d) Both (a) & (b) - Marginal costing is also known as:
(a) Indirect costing
(b) Direct costing
(c) Variable costing
(d) Both (b) and (c) - P/V Ratio is an indicator of …………… .
(a) the rate at which goods are manufactured
(b) the volume of sales
(c) the value of sales
(d) the rate of profit - Profits in a company can be increased by :
(1) Decreasing the selling price per unit
(2) Increasing the selling price per unit
(3) Decreasing the volume of sales
(4) Increasing the volume of sales
(5) Decreasing the fixed or variable expenses
(6) Increasing the fixed or variable expenses
(7) Giving more weightage for products having higher P/V ratio
(8) Giving less weightage for products having higher P/V ratio
Select the correct answer from the options given below —
(a) (1), (3), (5) and (7)
(b) (2), (4), (6) and (8)
(c) (2), (4), (5) and (7)
(d) (1), (3), (6) and (8) - Assertion (A) : Profit volume ratio is considered to be the best indicator of the profitability of the business.
Reason (R) : If profit volume ratio is improved, it will result in better profits.
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. - 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
Select the correct answer from the options given below —
(a) (1), (2), (5) and (7)
(b) (1), (3), (5) and (7)
(c) (3), (4), (6) and (7)
(d) (1), (2), (6) and (7) - Statement I :
Margin of safety represents the difference between the sales at break-even point and the total sales.
Statement II :
Margin safety can be expressed as a percentage of total sales or in value or in terms of quantity.
Codes :
(a) Statement I is correct but statement II is incorrect
(b) Statement I is incorrect but statement II is correct
(c) Both statements are correct
(d) Both statements are incorrect - Match the following :
List I
(A) Classification of costs into fixed and variable cost
(B) Difference between sales and variable cost
(C) Both fixed and variable cost are charged to product
(D) Relative profitability
List II
(1) Contribution
(2) P/V ratio
(3) Marginal Costing
(4) Absorption
Codes :
(A) (B) (C) (D)
(a) (4) (3) (2) (1)
(b) (3) (1) (4) (2)
(c) (3) (4) (1) (2)
(d) (4) (3) (1) (2)