MI – Mar-Jul 2020 – L1 – SA – Q9 – Costing Techniques

Identify the statement that is not an argument for using marginal costing in routine costing.

Question

Which of the following is NOT an argument for the use of marginal costing in routine costing?

A. Simple to operate
B. Apportionment of fixed costs is avoided
C. Under or over absorption of overheads is almost entirely avoided
D. Inventory valuation at full production costs is in line with accounting standards
E. Fixed costs are incurred on a time basis and do not relate to activity

Answer

D. Inventory valuation at full production costs is in line with accounting standards

Explanation:
The correct answer is option D, “Inventory valuation at full production costs is in line with accounting standards.”
Explanation: Marginal costing values inventory at variable cost, not full production cost, which includes fixed costs. Full production cost valuation aligns with absorption costing and not marginal costing.

Tags: Cost Management, Marginal Costing, Routine Costing
Level: Level 1

Topic: Costing Techniques
Series: MAR/JULY 2020

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