Marginal Cost – Page 2 – NBC Institute

QTB – May 2016 – L1 – SB – Q5a – Mathematics

This question involves finding the total cost function and the cost of producing 50 items using marginal cost and integration.

Question

The marginal cost of producing a particular item is given by

Required:
i. Find the total cost function , if the cost of producing 2 items is N1,660.
(7 marks)

ii. Find the cost of producing 50 items.

Answer

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Tags: Business Finance, Integration, Marginal Cost, Total Cost
Level: Level 1

Topic: Mathematics
Series: MAY 2016

QTB – May 2015 – L1 – SB – Q6 – Operations Research

This question involves calculating the change in revenue, total revenue, total cost, and total profit for a manufacturer based on given marginal cost and marginal revenue functions.

Question

A manufacturer determines that the firm’s Marginal Cost (MC) and Marginal Revenue (MR) functions are:

MR = R′(x)=100 + 0.1x

You are required to find the:

a. Change in revenue that results when the sales level increases from 20 to 30 units. (5 Marks)
b. Revenue resulting from the sale of 30 units. (5 Marks)
c. Cost of producing 30 units if the fixed cost (at $x = 0$ ) is N400. (5 Marks)
d. Total profit when 30 units of the product are sold. (5 Marks)

Answer

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Tags: Fixed Cost, Marginal Cost, Marginal Revenue, Profit, Total Revenue
Level: Level 1

Topic: Operations Research
Series: MAY 2015

QTB – Nov 2015 – L1 – SA – Q7 – Operations Research

This question identifies which factor does not affect the optimal replacement interval for an asset.

Question

If an asset can be replaced at the same cost and there is no time value of money, then the problem of obtaining the optimal replacement interval involves the following EXCEPT:

A. Finding the cumulative operating/maintenance cost
B. Finding the total depreciation
C. Adding (A) and (B) above to get total cost
D. Finding the year at which marginal cost is minimized
E. Finding the year at which average cost is minimum

Answer

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Tags: Average Cost, Cost Analysis, Marginal Cost, Replacement Theory
Level: Level 1

Topic: Operations Research
Series: NOV 2015

PM – May 2019 – L2 – Q7 – Pricing Decisions

Evaluates various pricing methods for a new product and calculates prices based on different strategies.

Question

Tetpack Nigerian Limited (TNL) produces various types of packaging products for the food industry. TNL has just introduced a new type of pack, and its marketing manager is considering how to penetrate the market with the pack. The following pricing strategies have been suggested:

i. Market skimming price
ii. Market penetration price
iii. Full cost plus price
iv. Return on investment price
v. Marginal cost plus price

The management accountant has provided the following data about the pack:

Non-current assets needed for the production of the pack: N2,000,000
Working capital requirements: N400,000
Expected annual sales volume: 40,000 units
Variable production costs: N60 per unit
Fixed production costs: N300,000 each year
Annual non-production costs: N100,000
Markup:
- Full cost plus price: 25%
- Marginal cost plus price: 40%
- Target return on investment: 10% per year

Required:
a. Discuss the above pricing methods and advise when each could be used. (10 Marks)

b. Calculate what the price of the pack should be if its price is based on:
i. Full cost plus pricing (1½ Marks)
ii. Marginal cost plus pricing (1½ Marks)
iii. Return on investment pricing (2 Marks)

Answer

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Tags: Cost Plus, Marginal Cost, Market Penetration, Market Skimming, Pricing Strategies, ROI
Level: Level 2

Topic: Pricing Decisions
Series: MAY 2019

MI – May 2016 – L1 – SA – Q11 – Cost-Volume-Profit Analysis

Calculate the number of units required to break even given the fixed costs, sales price, and marginal cost.

Question

A company manufactures a single product with a sales price of N1,000 and a marginal cost of N650. If the fixed cost is N685,300 per annum, then the number of units required to Break Even is:

A. 1,950
B. 1,955
C. 1,958
D. 1,985
E. 1,988

Answer

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Tags: Break-Even Point, Fixed Costs, Marginal Cost, Sales Price
Level: Level 1

Topic: Cost-Volume-Profit (CVP) Analysis
Series: MAY 2016

QT – May 2016 – L1 – Q5a – Mathematics of Business Finance

Calculate the total cost, average cost, and marginal cost of producing 5000 items, and determine the production level for the lowest average cost.

Question

a) If the total cost (in Ghana cedis) of producing $x$ items is given by the function

Required:
i) Calculate the total cost, average cost, and marginal cost of producing 5000 items. (6 marks)
ii) Determine the production level at which the average cost will be the lowest. (4 marks)

Answer

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Tags: Average Cost, Cost Functions, Marginal Cost, Optimization
Level: Level 1

Topic: Mathematics of Business Finance
Series: MAY 2016

QT – Nov 2017 – L1 – Q6b – Elements of Calculus

Calculate marginal cost, revenue, and profit for a company’s production of beverage cans.

Question

Kyerewaa Ventures is a manufacturing company in the business of producing beverage cans for clients in the brewery industry. The weekly total cost to produce $x$ cans is given by:

The demand function for the cans is given by:

$P (x) = 200 - 0.005 x$

The company has set a production limit to 10,000 cans and it sells all the cans that are produced.

Required:
i) Derive an expression for marginal cost, marginal revenue, and marginal profit. (4 marks)
ii) Determine the cost, revenue, and profit when the 2,501st can is produced and sold. (3 marks)
iii) Determine the cost, revenue, and profit when the 7,501st can is produced and sold. (3 marks)
iv) Advise the company whether to produce the 2,501st can or the 7,501st can. (2 marks)

Answer

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Tags: Cost Function, Marginal Cost, Marginal Profit, Marginal Revenue, Optimization, Revenue Function
Level: Level 1

Series: NOV 2017

QT – Nov 2017 – L1 – Q6a – Elements of Calculus

Distinguish between marginal cost and average cost in production.

Question

Distinguish between marginal cost and average cost in production.

Answer

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Tags: Average Cost, Marginal Cost, Production Costs
Level: Level 1

Topic: Elements of Calculus

QT – May 2017 – L1 – Q3b – Elements of Calculus

Use integration to calculate total cost from a marginal cost function with a given fixed cost.

Question

At the Zee manufacturing company, the marginal cost for producing $x$ gears, measured in hundreds, is:

If the fixed cost (the cost of producing zero items) is GH¢3000:

Required:

Determine the total cost for manufacturing 5000 gears.
(11 marks)

Answer

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Tags: Fixed Cost, Integration, Marginal Cost, Total Cost
Level: Level 1

Topic: Elements of Calculus
Series: MAY 2017

QT – May 2018 – L1 – Q3 – Elements of Calculus

Calculate total revenue, items for maximum revenue, and total profit from given marginal revenue and cost functions.

Question

a) The marginal revenue function of a manufacturing company is given by:

The marginal cost function is given by:

Let be the number of items either produced or sold.

Required:
i) Calculate the revenue generated when 50 items are sold. (2 marks)
ii) Calculate the number of items that will yield maximum revenue. (4 marks)
iii) Calculate the total revenue if 100 items are produced. (4 marks)
iv) Calculate the total profit for the 100 items. (4 marks)
v) If a tax of 20% is imposed on each item produced, find the cost of 100 items. (6 marks)

Answer

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Tags: Integration, Marginal Cost, Marginal Revenue, Total Profit, Total Revenue
Level: Level 1

Topic: Elements of Calculus
Series: MAY 2018

QT – Nov 2015 – L1 – Q7b – Elements of Calculus

Determine the number of TV sets a manufacturer should produce to maximize profit and calculate the maximum profit.

Question

A TV manufacturer finds that he can sell $x$ units per week at a price $p = 250 - 0.5 x$ each. His cost of production of $x$ TV sets per week is given by $C = 240 + 2 x$ .

Required:
(i) Determine how many sets per week he should produce to maximize his profit. (5 Marks)
(ii) Determine the maximum profit. (2 Marks)

Answer

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Tags: Marginal Cost, Marginal Revenue, Production, Profit Maximization, TV Sets
Level: Level 1

Topic: Elements of Calculus
Series: NOV 2015

MA – Dec 2023 – L2 – Q5 – Relevant cost and revenue | Decision making techniques

This question focuses on relevant costing for a special order and the distinction between marginal and differential costs.

Question

Semenhyia Ltd is involved in the design and manufacture of custom-built factory equipment. The company has just received an enquiry about the supply of 10 machines from one of their regular clients, Kukua Ltd.

Kukua Ltd has informed the company that the maximum price they are willing to pay is GH¢5,200 per machine. The order would need to be completed within two weeks.

The following details relate to the production of the machines:

i) Materials per machine:

10 units of Material A, which is used regularly by the company. The company has 120 units of Material A in stock, which originally cost GH¢120 per unit. The replacement cost of Material A is 20% higher than the original price.
5 units of Material B. The company has 40 units of Material B in stock, as it was purchased a few years ago for use in the production of other equipment, which the company no longer produces. If this material is not used in the production of this order, it would never be used again. The original purchase price for Material B was GH¢190 per unit. The replacement cost is GH¢150 per unit, and the net realizable value is GH¢130 per unit.
3 units of Material C. This material is used regularly and usually costs GH¢85 per unit. However, the earliest delivery time for new stock from the regular supplier is three weeks. An alternative supplier could deliver immediately but would charge GH¢90 per unit. Semenhyia Ltd has 600 units in stock, but 580 units are required to complete other orders over the next two weeks.

ii) Labour hours per machine:

12 skilled labour hours, paid GH¢20 per hour. Skilled workers are part of the permanent workforce, with 125 surplus skilled hours available per month. Skilled workers are paid time and a half for overtime.
22 unskilled labour hours, paid GH¢15 per hour, employed on a casual basis.

iii) Supervision: A supervisor currently paid GH¢56,500 per annum will oversee the project, but a replacement will be hired for the duration of the contract at a cost of GH¢8,500.

iv) Machine hours: Each machine requires 18 hours of processing time on factory equipment. If the order is not accepted, the equipment would be subcontracted to Fimi Ltd for a contribution of GH¢70 per hour.

v) Depreciation: The depreciation charge for using the equipment for this order would be GH¢4,000.

vi) Overheads: Overheads are absorbed at a rate of GH¢35 per skilled labour hour.

vii) Estimate costs: The planning department has incurred costs to date of GH¢600.

Required:

a) Explain relevant cost and state TWO (2) examples of relevant cost in short-term decision-making. (3 marks)

b) Determine, using relevant costing principles, whether or not Semenhyia Ltd should undertake the contract. Your answer must include an explanation for the inclusion or exclusion of each of the above points. (13 marks)

c) Distinguish between “marginal cost” and “differential cost”. (4 marks)

Answer

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Tags: Contract Pricing, Differential Cost, Marginal Cost, Relevant Costing, Short-Term Decisions
Level: Level 2

Topic: Decision making techniques, Relevant Cost and Revenue
Series: DEC 2023

IMAC – AUG 2022 – L1 – Q1 – Budgeting

Differences in operating profit under marginal and absorption costing, preparation of profit statements, production forecast, and material purchase budget.

Question

a) Marginal costing and Absorption costing are cost management techniques used to allocate cost to the products produced for their valuation. There are differences in the operating profit when either marginal costing or absorption costing is deployed.

Required: State TWO (2) reasons that account for the differences in the operating profit under Marginal costing and Absorption costing systems. (4 marks)

b) Adam Ltd is a producer of product Wale. In a period, it produced 20,000 units and sold 18,000 units of product Wale. The selling price per unit of the output is GH¢5. In the planned production period, relevant cost and revenue data were stated as:

	GH¢
Sales	100,000
Production cost:
Variable	35,000
Fixed	15,000
Administration and selling overhead:
Fixed	25,000

Required: Prepare a profit or loss statement based on the following costing systems: i) Marginal costing systems. (8 marks) ii) Absorption costing systems. (8 marks)

Answer

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Tags: Closing Stock, Fixed Overhead, Marginal Cost, Material Purchase Budget, Production Forecast
Level: Level 1

Topic: Budgeting
Series: AUG 2022

Question Tag: Marginal Cost

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QTB – May 2016 – L1 – SB – Q5a – Mathematics

This question involves finding the total cost function and the cost of producing 50 items using marginal cost and integration.

QTB – May 2015 – L1 – SB – Q6 – Operations Research

This question involves calculating the change in revenue, total revenue, total cost, and total profit for a manufacturer based on given marginal cost and marginal revenue functions.

QTB – Nov 2015 – L1 – SA – Q7 – Operations Research

This question identifies which factor does not affect the optimal replacement interval for an asset.

PM – May 2019 – L2 – Q7 – Pricing Decisions

Evaluates various pricing methods for a new product and calculates prices based on different strategies.

MI – May 2016 – L1 – SA – Q11 – Cost-Volume-Profit Analysis

Calculate the number of units required to break even given the fixed costs, sales price, and marginal cost.

QT – May 2016 – L1 – Q5a – Mathematics of Business Finance

Calculate the total cost, average cost, and marginal cost of producing 5000 items, and determine the production level for the lowest average cost.

QT – Nov 2017 – L1 – Q6b – Elements of Calculus

Calculate marginal cost, revenue, and profit for a company’s production of beverage cans.

QT – Nov 2017 – L1 – Q6a – Elements of Calculus

Distinguish between marginal cost and average cost in production.

QT – May 2017 – L1 – Q3b – Elements of Calculus

Use integration to calculate total cost from a marginal cost function with a given fixed cost.

QT – May 2018 – L1 – Q3 – Elements of Calculus

Calculate total revenue, items for maximum revenue, and total profit from given marginal revenue and cost functions.

QT – Nov 2015 – L1 – Q7b – Elements of Calculus

Determine the number of TV sets a manufacturer should produce to maximize profit and calculate the maximum profit.

MA – Dec 2023 – L2 – Q5 – Relevant cost and revenue | Decision making techniques

This question focuses on relevant costing for a special order and the distinction between marginal and differential costs.

IMAC – AUG 2022 – L1 – Q1 – Budgeting

Differences in operating profit under marginal and absorption costing, preparation of profit statements, production forecast, and material purchase budget.

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QTB – May 2016 – L1 – SB – Q5a – Mathematics

This question involves finding the total cost function and the cost of producing 50 items using marginal cost and integration.

You're reporting an error for "QTB – May 2016 – L1 – SB – Q5a – Mathematics"

QTB – May 2015 – L1 – SB – Q6 – Operations Research

This question involves calculating the change in revenue, total revenue, total cost, and total profit for a manufacturer based on given marginal cost and marginal revenue functions.

You're reporting an error for "QTB – May 2015 – L1 – SB – Q6 – Operations Research"

QTB – Nov 2015 – L1 – SA – Q7 – Operations Research

This question identifies which factor does not affect the optimal replacement interval for an asset.

You're reporting an error for "QTB – Nov 2015 – L1 – SA – Q7 – Operations Research"

PM – May 2019 – L2 – Q7 – Pricing Decisions

Evaluates various pricing methods for a new product and calculates prices based on different strategies.

You're reporting an error for "PM – May 2019 – L2 – Q7 – Pricing Decisions"

MI – May 2016 – L1 – SA – Q11 – Cost-Volume-Profit Analysis

Calculate the number of units required to break even given the fixed costs, sales price, and marginal cost.

You're reporting an error for "MI – May 2016 – L1 – SA – Q11 – Cost-Volume-Profit Analysis"

QT – May 2016 – L1 – Q5a – Mathematics of Business Finance

Calculate the total cost, average cost, and marginal cost of producing 5000 items, and determine the production level for the lowest average cost.

You're reporting an error for "QT – May 2016 – L1 – Q5a – Mathematics of Business Finance"

QT – Nov 2017 – L1 – Q6b – Elements of Calculus

Calculate marginal cost, revenue, and profit for a company’s production of beverage cans.

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QT – Nov 2017 – L1 – Q6a – Elements of Calculus

Distinguish between marginal cost and average cost in production.

You're reporting an error for "QT – Nov 2017 – L1 – Q6a – Elements of Calculus"

QT – May 2017 – L1 – Q3b – Elements of Calculus

Use integration to calculate total cost from a marginal cost function with a given fixed cost.

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QT – May 2018 – L1 – Q3 – Elements of Calculus

Calculate total revenue, items for maximum revenue, and total profit from given marginal revenue and cost functions.

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QT – Nov 2015 – L1 – Q7b – Elements of Calculus

Determine the number of TV sets a manufacturer should produce to maximize profit and calculate the maximum profit.

You're reporting an error for "QT – Nov 2015 – L1 – Q7b – Elements of Calculus"

MA – Dec 2023 – L2 – Q5 – Relevant cost and revenue | Decision making techniques

This question focuses on relevant costing for a special order and the distinction between marginal and differential costs.

You're reporting an error for "MA – Dec 2023 – L2 – Q5 – Relevant cost and revenue | Decision making techniques"

IMAC – AUG 2022 – L1 – Q1 – Budgeting

Differences in operating profit under marginal and absorption costing, preparation of profit statements, production forecast, and material purchase budget.

You're reporting an error for "IMAC – AUG 2022 – L1 – Q1 – Budgeting"

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