CA Inter P4 · Chapter 13 · Question 9 of 10
A component can be made in-house at a variable cost of ₹74 per unit, or bought from a supplier at ₹82 per unit. Existing fixed costs of ₹2,50,000 will not change whichever option is chosen, and there is spare capacity. For 15,000 units, the company should:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Make the component, saving ₹1,20,000
Explanation
Fixed costs are unaffected and therefore irrelevant. Relevant cost of making = ₹74 per unit against a purchase price of ₹82. Saving from making = (₹82 - ₹74) x 15,000 = ₹1,20,000.
More Marginal Costing MCQs
- Q1A product sells at ₹250 per unit with a variable cost of ₹160 per unit. The P/V ratio is:
- Q2For the same product (selling price ₹250, variable cost ₹160 per unit), fixed costs are ₹10,80,000 per annum. The break-even sales are:
- Q3With break-even sales of ₹30,00,000 and a P/V ratio of 36%, actual sales for the year are ₹40,00,000. The profit for the year is:
- Q4Sales and profit of a company for two periods were: Period 1 sales ₹12,00,000, profit ₹1,10,000; Period 2 sales ₹15,00,000, profit…
- Q5Fixed costs are ₹1,78,000 and the P/V ratio is 24%. The sales required to earn a profit of ₹2,30,000 are: