Marginal Costing

Worked examples (10)

• 1Value inventory under each method (4 marks)
• 2Build the contribution line (4 marks)
• 3Marginal-costing profit statement (6 marks)
• 4Absorption-costing profit statement (7 marks)
• 5Statement with under-absorption (6 marks)
• 6Profit difference from inventory change (5 marks)
• 7When inventory falls (5 marks)
• 8Explain the difference (4 marks)
• 9Both statements agree when no inventory change (5 marks)
• 10Which statement for which purpose (4 marks)

Model answers (10)

• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style

Worked examples (10)

• 1Calculate contribution (3 marks)
• 2Marginal cost vs full cost (3 marks)
• 3Total contribution and profit (4 marks)
• 4Special-order decision (6 marks)
• 5Special order — non-financial factors (4 marks)
• 6Make-or-buy decision (6 marks)
• 7Limiting-factor ranking (7 marks)
• 8Discontinuance decision (6 marks)
• 9A limitation of marginal costing (4 marks)
• 10Why contribution pricing is risky long-term (4 marks)

Model answers (10)

• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style

Worked examples (10)

• 1Contribution per unit (2 marks)
• 2Contribution to sales ratio (3 marks)
• 3Break-even point in units (3 marks)
• 4Break-even revenue (4 marks)
• 5Margin of safety in units (3 marks)
• 6Margin of safety percentage (3 marks)
• 7Output for a target profit (5 marks)
• 8Profit at a given output (4 marks)
• 9Revenue for a target profit (5 marks)
• 10Interpret the margin of safety (4 marks)

Model answers (10)

• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style

Worked examples (10)

• 1Identify the three lines (3 marks)
• 2Locate the break-even point (3 marks)
• 3Read profit and loss areas (4 marks)
• 4Margin of safety on the chart (3 marks)
• 5The profit-volume (P/V) chart (4 marks)
• 6Read values off a chart (5 marks)
• 7Why the lines may not be straight (4 marks)
• 8Fixed costs are not always fixed (4 marks)
• 9Usefulness of break-even analysis (5 marks)
• 10P/V chart vs break-even chart (4 marks)

Model answers (10)

• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style

Worked examples (10)

• 1Change in inventory (2 marks)
• 2Profit difference (3 marks)
• 3Reconcile when inventory rises (4 marks)
• 4Reconcile when inventory falls (4 marks)
• 5Reconcile absorption to marginal (4 marks)
• 6Set out a reconciliation statement (5 marks)
• 7Find the fixed OAR from the profits (5 marks)
• 8Explain the reconciling item (4 marks)
• 9No inventory change (3 marks)
• 10Reconcile after preparing both statements (5 marks)

Model answers (10)

• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style

Worked examples (10)

• 1Profit at a given volume (3 marks)
• 2Effect of a price rise on break-even (5 marks)
• 3Effect of a variable-cost rise (5 marks)
• 4Effect of a fixed-cost rise (4 marks)
• 5Target profit after a change (5 marks)
• 6Price rise with a demand fall (6 marks)
• 7Weighted-average contribution (5 marks)
• 8Break-even with a sales mix (6 marks)
• 9Effect of a change in mix (5 marks)
• 10Limitations of CVP analysis (5 marks)

Model answers (10)

• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style