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Flashcards · 9615 · AS Topic 10

Marginal costing (AS Level) flashcards

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Topic 10: Marginal costing

Classify by traceability and behaviour: cushion fabric; a factory cleaning contract; a machine operator on a weekly wage
Fabric: direct and variable. Cleaning contract: indirect and fixed. Operator on a weekly wage: could be direct yet fixed.
A clock sells for $120; marginal cost $72; fixed costs $43,200. Contribution, break-even and break-even revenue?
Contribution $48. Break-even 43,200 ÷ 48 = 900 clocks. Revenue 900 × 120 = $108,000.
Same clocks (contribution $48, fixed costs $43,200), expected sales 1,250. Profit and margin of safety?
Profit (1,250 × 48) − 43,200 = $16,800. Margin of safety 350 clocks, 28% of expected sales.
Under marginal costing, 50 clocks with a marginal cost of $72 are unsold. Closing inventory value?
50 × 72 = $3,600. Inventory is at marginal cost; fixed costs are charged in full to the period.
Each forklift driver costs $1,800 a month and can move 12,000 cartons. Cost type and cost for 30,000 cartons?
Stepped. 30,000 cartons need 3 drivers: $5,400.
Contribution $8.50 per unit; fixed costs $40,800. Units for a $12,000 profit?
(40,800 + 12,000) ÷ 8.50 = 6,211.8, so 6,212 units: round up.
A bracket costs $3.20 marginal cost to make; a supplier charges $3.60. Buying all 10,000 ends a $5,000 tooling lease. Effect of buying?
Extra cost 10,000 × 0.40 = $4,000; lease saved $5,000: profit rises by $1,000, before non-financial factors.
Spare capacity: a one-off order for 600 units at $16; marginal cost $13.50; no extra costs. Effect?
600 × (16 − 13.50) = $1,500 higher profit.
Skilled labour is short. R: contribution $18 using 1.5 hours. S: $30 using 3 hours. Which takes priority?
R: $12 per hour against $10 for S. R first, despite its lower contribution per unit.
A department earns contribution $22,000. Closing it ends $15,000 of fixed costs; the space could be sublet for $4,000. Change in profit?
−22,000 + 15,000 + 4,000: profit falls by $3,000, so keep it open on financial grounds.
What shifts the break-even point up or down?
Up: a lower price, a higher variable cost or higher fixed costs. Down: the reverse.

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