Marginal Costing
Marginal Costing |
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Key Learning Outcomes
- Know the equation used in all parts of the question after part (a).
- Understand the difference between rounding an answer in units and rounding an answer in €
- Know the theory of Marginal Costing and all other Management Accounting theory.
Introduction
Marginal Costing is one of five Management Accounting topics asked as Questions 8 and 9 in Section 3 of the accounting examination over the years as follows:
1997, 1999, 2001, 2004, 2006, 2008, 2011, 2014
The years stated above are listed solely to assist revision ‒ See Practical Matters 5.
Section 3 of the accounting examination is worth 80 marks out of a total of 400 marks (20%).
The choice in Section 3 is to answer either Question 8 or Question 9 (80 marks each).
Practical Matters:
(1) Always do the solution in the same way ‒ this will increase speed and confidence.
(2) Always round units up but only round euro up if the figure is ≥ 5.
(3) Use only one colour in the solution ‒ use of colour slows down the work.
(4) Write the solution on the left and right hand side of a double page.
(5) Do not try to predict the examination paper ‒ study all possible questions in this section.
(6) Know the maximum time for this question ‒ 36 minutes.
Sample Exam Q&A
Question |
Mooney Ltd. produces a single product. The company’s profit and loss account for the year ended 31/12/2016 during which 70,000 units were produced and sold, was as follows:
The materials, direct labour and 20% of the factory overheads are variable costs. Apart from commission of 5% on sales, selling and administration expenses are fixed.
You are required to:
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Sample Answers (a, b & c) |
ABCDEFThree differences in focus between Management Accounting and Financial Accounting
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Student Activity
Q1 | After part (a), state the equation used in all subsequent parts of the Mooney Ltd. question above. |
Q2 | In a marginal costing question, state the difference between rounding an answer in units and rounding an answer in €. |
Q3 | List and explain the limitations / assumptions of marginal costing. |
Q4 | For what purpose is the Contribution Sales Ratio regularly used? When is the use of this ratio essential? |
Q5 | Explain what is meant by a step fixed cost. |
Q6 | Outline the differences between Marginal and Absorption Costing. Indicate which method should be used for financial accounting purposes and why. |
Q7 | Outline the differences in focus between Management Accounting and Financial Accounting. |
Student Activity Answers
You can download/view the answers to the above questions here