Absorption And Marginal Costing (Part 1)

Jul 17, 2026

Uploaded by Noah

Absorption and marginal costing seminar materials covering core management accounting concepts and exam-style practice. The document defines key terms such as contribution, variable costs, period costs, absorbed costs, and overhead absorption rate, then tests understanding through matching, true/false questions, and foundation-level computational problems. It includes period cost structure for contribution calculation, compares effects of marginal versus absorption costing on profit and inventory valuation, and applies overhead absorption mechanisms including under/over absorption based on machine hours and planned versus actual activity.

LanguageEnglish

CategoryExam

FormatDOCX

Pages18

Reading Time45 min

AccessFree to download

ABSORPTION AND MARGINAL COSTING (PART 1) (for two consecutive seminars) TASK №1: DEFINITIONS Match the following sentences (1-6) with the words or phrases (A-H) on the following page. Write your answers in the grid below. Budgeted fixed overheads Direct materials Direct labour Variable production overhead Contribution Variable Absorbed Period costs The marginal production cost per unit of item usually consists of … … … , … …… and… … … Marginal cost is the… … … cost of one unit of product or service … … … … is an important measure in marginal costing, and it is calculated as the difference between sales value and marginal or variable cost of sales. In marginal costing, fixed production costs are treated as… … … and are written of as they are incurred. In absorption costing, fixed costs are… … … into the cost of units. In order to calculate the Overhead absorption rate, … … … is divided by budgeted units. TASK № 2: TRUE/FALSE Contribution information is more useful for decision making. True B) False In marginal costing, cost of sales does not include a share of fixed overheads. True B) False Absorption costing always give higher profit than marginal costing. True B) False If there are no changes between opening and closing inventory both of methods marginal and absorption costing give the same profit. True B) False In absorption costing closing inventories are valued at marginal production cost. True B) False TASK № 3: FOUNDATION LEVEL QUESTIONS The costs and sales revenue in a period are as follows. $000 Direct materials 24 Direct labour 36 Direct expenses 5 Variable production overheads 6 Fixed production overheads 70 Administration overheads 30 Variable selling overheads 8 Fixed selling overheads 35 Sales 250 What is the total contribution for the period? $171,000 $176,000 $179,000 $184,000 Which TWO of the following amounts would change if a company changed its standard costing system from marginal costing to absorption costing? A. Inventory value B. Direct labour efficiency variance C. Sales volume variance D. Fixed overhead expenditure variance Which TWO of the following statements relating to marginal costing are TRUE? A. It can be used for external financial reporting B.

Jul 17, 2026

Uploaded by Noah