Back to Questions
SSC Financial and Cost Accounting P-1 QUESTION #6097
Question 1

Which of the following statements about marginal costing are correct?

  1. It assists in resource optimization when a limiting factor is present.
  2. It ensures decisions are based on the full absorption cost.
  3. It includes the apportionment of service department costs.
  4. It typically results in a lower inventory valuation compared to absorption costing.
  • 1 and 4 only✔️
  • 1, 2 and 4
  • 2 and 3
  • 3 and 4 only
Correct Answer Explanation

Marginal costing focuses on variable costs (contribution), making it ideal for limiting factor analysis (1). Because it excludes fixed overheads from inventory, valuation is lower than absorption (4). Statements 2 and 3 refer to absorption costing.