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9706 · 2.2.3

Marginal costing — practice questions

Practice and worked examples for 9706 Marginal costing. Short previews only — attempt the full question in MarkScheme against the official scheme.

Worked example 1

Sales 2,000 units @ $40. Variable cost $22 per unit. Fixed costs $24,000. Prepare marginal costing profit statement.

Show solution outline

Sales = 2,000 × 40=∗∗40 = **80,000** Variable costs = 2,000 × 22=∗∗(22 = **(44,000)** Contribution = **36,000∗∗36,000** Fixed costs = **(24,000)∗∗24,000)** Profit = **12,000∗∗12,000**

Check: Contribution per unit = 18;2,000×18−24,000=12,000✓18; 2,000 \times 18 − 24,000 = 12,000 ✓

Worked example 2

Absorption profit $12,000. Opening inventory 100 units; closing 300 units. Fixed overhead absorption rate $6 per unit. Reconcile to marginal profit.

Show solution outline

Inventory increase = 300 − 100 = 200 units Fixed overhead in inventory = 200 × 6=∗∗6 = **1,200**

Marginal profit = Absorption profit − increase in inventory fixed OH = 12,000 − 1,200 = **10,800∗∗10,800**

(Higher closing inventory → absorption profit higher than marginal.)

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