22.12 - Limitations of Marginal Costing
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Practice Questions
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What is the main limitation of marginal costing related to fixed costs?
💡 Hint: Think about the different types of costs involved.
Explain why marginal costing is not suitable for long-term financial planning.
💡 Hint: Remember that fixed costs must be factored into pricing.
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Interactive Quizzes
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Marginal costing ignores which type of cost?
💡 Hint: Think about the costs that remain constant.
True or False: Marginal costing is suitable for long-term planning.
💡 Hint: Consider the nature of fixed costs.
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Challenge Problems
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A company is using marginal costing to assess a new product with significant fixed overheads. Discuss the potential outcomes of this approach.
💡 Hint: Think about the overall expenses involved in production.
Evaluate how linear cost behavior assumptions in marginal costing might lead to poor decision-making in fluctuating markets.
💡 Hint: Consider how costs can change based on production levels.
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