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In marginal costing, which costs are considered relevant for decision-making?

Practice Questions

Q1
In marginal costing, which costs are considered relevant for decision-making?
  1. All fixed costs
  2. All variable costs
  3. Only incremental costs
  4. Only sunk costs

Questions & Step-by-Step Solutions

In marginal costing, which costs are considered relevant for decision-making?
  • Step 1: Understand that marginal costing focuses on the costs that change with the level of production.
  • Step 2: Identify incremental costs, which are the additional costs incurred when producing one more unit.
  • Step 3: Recognize that fixed costs (costs that do not change with production levels) are not considered relevant in marginal costing.
  • Step 4: Realize that relevant costs for decision-making include variable costs and any additional costs that will be incurred if production increases.
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