Questions and Answers
In the context of marginal costing, how is decision making simplified in make or buy scenarios?
By bifurcating total costs into fixed and variable components
Why is the application of absorption costing considered misleading in make or buy decisions?
It does not consider variable costs
How does marginal costing ensure a more realistic valuation of stock compared to other methods?
By valuing stocks at variable costs only
What does marginal costing provide to help maintain or achieve a desired level of profits?
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How does marginal costing facilitate cost control compared to other costing methods?
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In what context are key factor problems relevant in businesses?
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What helps in better evaluation of different divisions based on cost-volume-profit analysis?
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Why is responsibility accounting more effective when based on marginal costing?
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In the short-run, what remains consistent in marginal costing, facilitating better decision making?
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Which factor is considered when making buy or make decisions in marginal costing?
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What does marginal costing help in maintaining for a business operation?
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How does marginal costing contribute to realistic valuation of stock?
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What is a challenge in adopting marginal costing in capital intensive industries?
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Why is it not advisable to fix selling prices based solely on contribution under marginal costing?
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What is a limitation of using marginal costing for performance evaluation?
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How does marginal costing help in maintaining the desired level of profit?
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Why may fixing selling prices under marginal costing be challenging in 'cost plus contracts'?
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Why is it difficult to adopt marginal costing in multi-product businesses?
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