BUSINESS ADMINISTRATION
ACCOUNTING FOR MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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True
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False
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Detailed explanation-1: -’b. Costs that are small and unimportant with little impact on profits are called marginal costs. ‘ is not a true statement.
Detailed explanation-2: -Marginal cost is the expense incurred by a business for producing an additional unit of a good or service. It is calculated by taking the total cost of producing additional products and dividing it by the total number of extra units produced.
Detailed explanation-3: -The technique of marginal costing is based on the distinction between product costs and period costs. Only the variables costs are regarded as the costs of the products while the fixed costs are treated as period costs which will be incurred during the period regardless of the volume of output.
Detailed explanation-4: -Use – marginal costing is not allowed for financial reporting purposes whereas absorption costing can be used for both financial and management accounting.