Question

19. Under marginal costing the cost of product includes:
(A) Prime cost
(B) Prime cost and variable cost
(C) Prme cost and fixed overheads
(D) Prime cost and factory overheads​

Answer 1

Explanation:

Variable costs are dependent on production output. ... Examples of variable costs are sales commissions, direct labor costs, cost of raw materials used in production, and utility costs. The total variable cost is simply the quantity of output multiplied by the variable cost per unit of output.

Answer 2

Under marginal costing, the cost of the product includes (C) Prime cost and fixed overheads.

• Marginal costing is a technique of costing that is concerned with marginal cost (MC).
• The marginal cost gives the change in the total cost that arises when the quantity of produce is increased.
• Marginal costing has various uses, especially in profit planning. It helps to determine the possible profit at different levels of production and sale.
• It is also useful in decision-making regarding the fixation of the selling price and export decision.
• The formula is:

        MC =  Change in Total Costs / Change in Quantity.