22.10. Features of Marginal Costing

Try these first

1. 1.

   What are the two main types of costs in marginal costing?

   Hint

   Think about costs that don't change vs those that do.

2. 2.

   What does marginal costing value inventory at?

   Hint

   Consider which costs are included in product pricing.

3. 3.

   What are the two cost types emphasized in marginal costing?

   • Fixed and Implicit
   • Fixed and Variable
   • Variable and Overhead

   Hint

   One type of cost remains unchanged irrespective of production levels.

4. 4.

   In marginal costing, inventory is valued at which cost type?

   • True
   • False

   Hint

   Think about the nature of marginal costs.

5. 5.

   A company has fixed costs of $30,000 and variable costs of$5 per unit. If they sell their product for $10 per unit, calculate the break-even point in units and analyze how a decrease in sales price to$8 would affect their profitability.

   Hint

   Think about how lower prices change your revenue generation.

6. 6.

   Evaluate the advantages and disadvantages of using marginal costing for long-term strategic decisions versus short-term operational decisions.

   Hint

   Reflect on time frames and the complexity of costs in planning.