Deck 9: Relevant Costs Marginal Costing, and Short-Term Decision Making

Question 1

Alex Limited manufactures 3 products, A, B and

A) Zero units of product A, 125 units of product B and 700 units of product
B) 250 units of product A, zero units of product B and 700 units of product
C) 500 units of product A, 300 units of product B and 360 units of product C
D) 500 units of product A, zero units of product B and 600 units of product C

Answer 1

500 units of product A, zero units of product B and 600 units of product C

Question 2

Which of the following are irrelevant costs in short term decision making? Please select all that apply.

A) Sunk costs.
B) Fixed costs.
C) Past costs.
D) Opportunity costs.

Answer 2

Sunk costs.
Fixed costs.
Past costs.

Question 3

XYZ makes one product which it sells for £100 per unit. Annual sales are 4,000 units. Break-even point is 2,000 units and total annual fixed costs are £120,000. What is the variable cost per unit of production and sales?

A) £30
B) £40
C) £60
D) £70

Answer 3

£40

Question 4

Target profit in units =

A) Actual sales units - break-even sales units
B) Target profit in £s ÷ contribution per unit of sales
C) (Actual sales units - break-even sales in units) x contribution per unit of sales.
D) Break-even point in units + (target profit in £s ÷ contribution per unit of sales)

Question 5

Which of the following costing techniques employ knowledge of break-even point in their calculations?
Please select all that apply.

A) Margin of safety
B) Sensitivity analysis
C) Target profit
D) Marketing decisions

Question 6

DTT makes one product. Annual sales of this product are 5,000 units and the margin of safety is 2,000 units. Total annual fixed costs are £150,000 and the variable cost per unit of production is £35. What is the selling price of each unit of product?

A) £50
B) £65
C) £85
D) £110