Self-test 1. Fixed costs:

(a) Tend to remain fixed irrespective of the level of activity.

(b) Tend to remain fixed over the short and medium term.

(c) Both of the above.

2. Martin has a budgeted profit of £350,000. The actual results show an adverse sales variance of £70,000. This is in spite of a favourable production variance of £90,000. What profit has been actually achieved?

(a) £440,000

(b) £420,000

(c) £370,000

(d) £280,000 3. What system of costing values output only in terms of the variable costs of production?

(a) Marginal costing

(b) Activity-based costing

(c) Full (absorption) costing

(d) Costing by management discretion 4. When a company faces a shortage of skilled labour, it needs to decide which products it should continue to manufacture. To do this it ranks the products.
What criteria does it use?

(a) the contribution earned per unit;

(b) the profit margin earned per unit;

(c) the gross profit margin earned per skilled labour hour;

(d) the contribution earned per skilled labour hour.