What is the primary objective of absorption costing?

To determine variable costs for decision-making.

To allocate all production costs to products.

To calculate contribution margin.

What is the key difference between marginal costing and absorption costing?

Marginal costing includes all production costs, while absorption costing focuses on variable costs.

Marginal costing ignores fixed costs, while absorption costing includes both fixed and variable costs.

Marginal costing is used for external financial reporting, while absorption costing is used for internal decision-making.

Marginal costing is more complex than absorption costing.

In marginal costing, what does the term "contribution margin" represent?

The total profit of the company.

The difference between total sales and total variable costs.

The difference between total sales and total costs.

The profit generated from fixed costs.

Why is marginal costing considered useful for decision-making during periods of fluctuating production levels?

It provides a fixed cost allocation.

It focuses on variable costs and their impact on profit.

It includes all production costs.

What does the marginal cost formula calculate?

Change in total costs when producing additional units.

What does the term "breakeven point" refer to in the context of marginal costing?

The point where total costs equal total revenue.

The point where variable costs equal fixed costs.

The point where total costs are minimized.

The point where variable costs are zero.

Why is marginal costing considered a valuable tool for optimizing cash flow in financial modeling?

It helps in calculating contribution margin.

It accounts for changes in variable costs with production volume.

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