Chapter:6 

Absorption and Variable/Marginal Costing

Review Questions 

A. OBJECTIVE TYPE AND MULTIPLE CHOICE QUESTION

1. Fill up blanks using suitable Words:

(i) Abosorption costing is also known as ......... costing.

(ii) Under ............. Costing, cost per units remains same only if there is no change in the level of output.

(iii) Under.......... costing all costs including fixed and variable are charged to products. 

(iv) The term marginal costing is also referred to as................costing costs are treated as product costs.

(Ans.() full: (i) absorption: (i) absorption; (iv) variable: (v) marginal: (vi) absorption] 


2. State whether the following statements are True or False : 

(i) Absorption costing is also known as direct costing.


(ii) Variable costing is also referred to as marginal costing.

(iii) Absorption costing is the total cost technique. (iv) In marginal costing decision making is based upon profit.

(v) Under absorption costing the managerial decisions are guided by contribution. 

(vi) It may not be possible to prepare flexible budgets under absorption costing.


(Ans. (i) False: (ii) True; (iii) True; (iv) False: (v) False: (vi) True)

3. Multiple Choice Questions

(i) Absorption costing is also known as:

(a) Full costing (c) Direct costing

(b) Period costing

(d) Variable costing

(n) All costs are treated as product costs under:

(a) Absorption costing

(c) Both (a) and (b).

(b) Marginal costing

(d) None of these

(iii) Fixed costs are treated as period costs under:

(a) Marginal costing (c) Full costing

(b) Absorption costing

(b) All of these

[Ans. (i) (a): (ii) (a); (iii) (a)]

B. SHORT ANSWER TYPE QUESTIONS

1. What do you mean by absorption costing?

2. What is full costing?

3. Give any two basic features of absorption costing.

4. What is variable costing?

5. What is meant by marginal costing?

6. What are the advantages of absorption costing?

7. How is income ascertained under absorption costing?

8. Give any three limitations of absorption costing.

9. Define marginal cost and marginal costing.

10. Distinguish between absorption costing and marginal costing.

11. Distinguish between marginal cost and direct cost.

12. Give a proforma for ascertainment of income under marginal costing. 

13. Why the profit under marginal costing differs from profit under




Type-Bharat kalita